Preamble

The House met at half-past Two o'clock

PRAYERS

[Mr. SPEAKER in the Chair]

Oral Answers to Questions — INDUSTRY

Post Office (Parcel Service)

Mr. McCrindle: asked the Secretary of State for Industry what discussions he has had with the Chairman of the Post Office regarding the future of the parcel service.

The Secretary of State for Industry (Mr. Eric G. Varley): I have recently discussed with the Chairman the Post Office's proposal to increase its parcel tariffs. Following this, and in the light of the advice of the Price Commission and representations from the Post Office Users' National Council and other interested parties, I decided to abate the proposed increase from 25 per cent to 13 per cent.

Mr. McCrindle: Does not the Secretary of State agree that the parcel service, with high fixed costs, can only ever become viable if it attracts additional business? Next time he meets the Chairman of the Post Office will he suggest that a more aggressive marketing policy on the part of the Post Office in the parcel service would probably lead to a better situation than the Post Office continuing to complain because it did not get all its own way after the Secretary of State's intervention?

Mr. Varley: I know that the Post Office Corporation, the Chairman and others responsible are looking at ways of getting profitable business in its parcel activities. I am sure that they will bear in mind what the hon. Gentleman has said.

Mr. Ronald Atkins: Would it not make sound sense to co-ordinate the parcels

division of the Post Office with the two other public undertakings which carry parcels, all of them at a loss?

Mr. Varley: There is a great deal of merit in what my hon. Friend suggests, although I am not making a commitment that this will be done. I know that he will be aware that in the consultative document on transport policy there was a suggestion that the whole public sector parcels carrying business should be looked at.

Mr. Tom King: In his discussions with the Chairman of the Post Office did the Secretary of State raise the proposal of the Post Office, now implemented, to cease Sunday collections? Is he aware of the widespread public concern about this decision, concern which is shared by the Post Office Users' National Council? Is he prepared to comment on this matter?

Mr. Varley: I recall that in our debate a few months ago the hon. Gentleman, or certainly some hon. Members opposite, urged the Government to call on the Post Office Corporation to make economies. I know that this matter has caused public concern. As I understand it, the Post Office Corporation will be reviewing the situation in a year's time.

Chrysler United Kingdom Limited

Mr. Moonman: asked the Secretary of State for Industry if he will make a statement on the current state of discussions with Chrysler United Kingdom Limited.

Mr. Varley: My Department is involved in continuing discussions with Chrysler United Kingdom about the implementation of the agreement, monitoring of the company's performance and the planning agreement which it is intended to conclude. We also maintain discussions with the company which stem from normal sponsorship responsibility.

Mr. Moonman: Do the figures originally given to the House for the Government's commitment still apply, or have they been altered in any direction? Is the company now bound by the original agreement?

Mr. Varley: I think that there have been a few changes since the matter was debated in the House. In particular,


there have been changes in the level of the work force now required for Chrysler United Kingdom. I believe that a meeting took place between Chrysler United Kingdom and the work force last Friday and there was a suggestion that some of the redundancies previously envisaged would not now go ahead.

Mr. Hal Miller: Will the Secretary of State tell the House whether in his or his Department's discussions with the Chrysler Corporation there has been any discussion about the import content of Chrysler's share of the domestic market? Will he tell the House what that percenttage is?

Mr. Varley: No. I need notice of that question. Continuing discussions are taking place between officials of my Department and Chrysler United Kingdom. Coopers and Lybrand, on behalf of the Department, monitored the company's performance. If the hon. Gentleman puts down a specific Question about that, I shall do my best to answer it.

Mr. Heseltine: Has there been any revision, upwards or downwards, in the amount of Government funds needed to carry through the Government's strategy?

Mr. Varley: There have not been any changes in that. It is still envisaged that Chrysler United Kingdom will make a loss this year of approximately £40 million. I cannot be more precise than that at this stage. I apologise to my hon. Friend the Member for Basildon (Mr. Moonman) for not answering this point earlier when he put it to me. I answered the other part of his question rather fully. I can tell the House that, so far, under the agreement, £27 million has been advanced to Chrysler to meet losses. It has also received £2 million by way of loan.

Aerospace (Collaborative Civil Projects)

Mr. Tebbit: asked the Secretary of State for Industry what progress be has recently made towards agreement with the responsible authorities of other countries upon future collaborative civil aerospace projects.

Mr. Pattie: asked the Secretary of State for Industry whether he has had any further discussion with European

Ministers regarding future new European collaborative aerospace projects.

The Minister of State, Department of Industry (Mr. Gerald Kaufman): I shall be having talks on these matters with M. Cavaille, French Secretary of State for Transport, in Toulouse at the end of the month. Extensive discussions are in progress, both at industry and official levels both in Europe and with the United States companies, aimed at defining possible future aircraft projects and the options for collaboration on them.

Mr. Tebbit: Is not the Minister aware that I asked him about progress and not about a list of the endless words which are being muttered by him and his cohorts? Is it not a better measure of progress, since the blight of nationalisation, that the two major American contractors are now discussing partnership for the future with French companies rather than with British companies?

Mr. Kaufman: The hon. Gentleman always seeks to put the worst possible construction on every situation. He knows very well that this Government are anxious to enter into collaborative projects with our European partners. I have been involved in contacts with our European partners on that. As it happens, I shall also be meeting the President of Boeing this afternoon.

Mrs. Hayman: Would my hon. Friend comment on some of the reasons, on which Conservative Members could perhaps elaborate, why the progress of nationalisation has been so slow? A little nearer home, has his Department yet been able to make a response to Hawker Siddeley's proposals on the HS146 and future work?

Mr. Kaufman: My hon. Friend has a later Question on this, which it would be wrong to anticipate. On the former part of her question, it sometimes appears to me that Conservative Members are interested in a successful British aerospace industry only provided that it is privately-owned but funded by the State.

Mr. Pattie: Is the Minister aware that while he is having these conversations, which have been going on for some months now, the future projects of the European industry have already been defined and that the aerospace industries


of Europe and America are getting to the point of giving up hope that they can ever look to the British aerospace industry—or, more particularly. to the British Government—for any sense of priority and direction? When will he do something about that?

Mr. Kaufman: I am interested that the hon. Gentleman should talk about matters which have not been defined. One of the problems for me is that this Government inherited no such definitions from the Conservative Party. If only we had had some projects to take over from them, perhaps we could have got on with them.

Mr. Molloy: In this international co-operation and collaboration, is any way of developing quieter aircraft being discussed in order to alleviate many of the problems which afflict people in places like Ealing, where they suffer dramatically from aircraft noise?

Mr. Kaufman: I congratulate my hon. Friend on, as always, speaking up on behalf of his constituents. The search for quieter aircraft is one of the things on which we are constantly engaged.

Mr. Heseltine: I am sure that we understand and welcome the fact that the Minister is now having meaningful talks with our European allies. But why, when the Labour Party came to power, did it abandon the talks which we had already initiated?

Mr. Kaufman: Obviously I do not know what talks the hon. Gentleman initiated, since I am not able to see what he did when he was in office. Sometimes I am grateful for that.

National Enterprise Board

Mr. Nelson: asked the Secretary of State for industry what policy he intends to adopt with regard to the issue of directives to the NEB on the acquisition of profitable manufacturing companies.

Mr. Kaufman: It is a statutory function of the NEB to make such acquisitions. I am very satisfied with the progress that the NEB is making and I do not contemplate giving it a direction on this matter.

Mr. Nelson: How does the Minister reconcile this policy with the very firm rebuttal which his right hon. Friend the

Prime Minister gave at the NEC meeting last week to the proposal of the Labour Home Policy Committee to extend public ownership further into profitable sectors of manufacturing industry?

Mr. Kaufman: The hon. Member is giving us accounts of what took place at the National Executive which are not in accord with what took place. In addition, my right hon. Friend the Prime Minister is an outstanding exponent of the policies put through by this Government. One of them is the Industry Act 1975, under which the National Enterprise Board can make investments in profitable private enterprise manufacturing industry, and that is what it will go on doing.

Mr. Heffer: Is my hon. Friend aware that Conservative Members should not always believe what they read in the newspapers about the National Executive? Would he turn his mind to the specific point and say that what is being proposed by the NEB—to extend into the profit-making industries—is as laid down clearly in the Act?

Mr. Kaufman: My hon. Friend was actually present at the National Executive meeting on which the hon. Member for Chichester (Mr. Nelson) claims to be such an expert. The National Enterprise Board has so far taken substantial shareholdings in International Computers and in Brown Boveri Kent. It has other acquisitions in hand which are still commercially confidential.

Mr. Grylls: Can the Minister confirm that the NEB will not be taking over any pharmaceutical companies? Can he give a firm commitment on that point?

Mr. Kaufman: Not at all. If the NEB found that it was appropriate under its functions to enter the pharmaceutical range of industries, that would be a very appropriate thing for it to do.

Mr. loan Evans: Why is it acceptable to the Conservative Party for the NEB to take over unprofitable failures of private enterprise but not the profitable sectors of manufacturing industry? Would my hon. Friend comment on the statement made today that British Leyland, although a failure under private enterprise, has made £14 million pre-tax


profits in the first six months of State ownership?

Mr. Kaufman: Just because the Conservatives' only recent act of nationalisation—namely, Rolls-Royce—was an unprofitable company, they seem to have this fixation that public enterprise must always be unprofitable. We intend to disprove that fixation.

Mr. Tom King: Is the new Prime Minister's policy still that of looking for a fixed frontier between the public and the private sectors? If that is so, how can it be achieved if the NEB is allowed to acquire yet more profitable manufacturing companies?

Mr. Kaufman: The Prime Minister has made it very clear that this Government's stand on public enterprise is that contained in the White Paper "The Regeneration of British Industry".

British Leyland

Mr. Ridley: asked the Secretary of State for Industry what salary is paid to the managing director of BLMC; and what expenses he is allowed.

Mr. Varley: The terms and conditions of employment of the Chief Executive of British Leyland Limited are a matter for the British Leyland Board.

Mr. Ridley: If the right hon. Gentleman will not answer the Question, may I tell him that the answer is £40,000 a year? While I welcome the Labour Party's conversion to paying high rates for a high responsibility job, how does he justify that to the chairmen of the nationalised industries who are on hardly half the gross pay of the Chief Executive of British Leyland?

Mr. Varley: I do not have to justify it, because it was not a salary decided by the Government. It is decided, as I say, by the board of British Leyland Ltd. That is the position.

Mrs. Wise: What is the Secretary of State's view of the sustained campaign of denigration in the Press of British Leyland workers? Is he aware that those workers are extremely anxious that British Leyland should be efficiently and effectively managed and that, for example, they should be able to fulfil rapidly orders for items like Land Rovers, which are still in very short supply?

Mr. Varley: My hon. Friend is right. There is a determination among those who work for British Leyland to make a success of that company. The bus and truck division of British Leyland, as my hon. Friend says, is profitable and expanding.

Mr. Tebbit: If the Secretary of State is not prepared to answer questions about the salary of the Chief Executive of BLMC, why did he accept this Question on the Order Paper? What is more, is it not true that, whatever the fiction, the fact is that the Secretary of State does fix this salary? It is made with his agreement and he is merely wriggling at the Dispatch Box yet again.

Mr. Varley: It is not for me to decide what Questions are accepted by the Table. The position is as I have stated. It is not for me to state the salaries of the executives of British Leyland. I hope that the House will agree that it would be very unwise for a Minister to do that.

Mr. Dykes: asked the Secretary of State for Industry what further payments he intends to authorise in the NEB for British Leyland during the second half of 1976.

Mr. Stonehouse: asked the Secretary of State for Industry if he will make a statement with regard to the level and frequency of further Government grants and other subventions to British Leyland, in the light of the recent strikes and restrictive practices in the industry which, according to the chairman, undermine its prospects of achieving viability.

Mr. Shersby: asked the Secretary of State for Industry what will be the amount and timing of any furher tranches of public money made available to British Leyland; and whether he will make a statement.

Mr. Norman Lamont: asked the Secretary of State for Industry whether he is satisfied with the progress at British Leyland to meeting the Government's objectives; and whether he will make a statement about further Government finance.

Mr. Varley: The amount and timing of any further sums of public money to be made available to British Leyland are yet


to be decided. The Government will make their intentions known to the House following consideration of the NEB's report on its review of British Leyland's progress and future plans. The conditions which need to be fulfilled if further substantial sums of public money are to be provided to British Leyland are well known.

Mr. Dykes: Is the Secretary of State aware that that is a disappointing answer when the company's planners know approximately what they need, bearing in mind the interim statement published today concerning the arrival of the break-even stage, which means different things to different people? Is it not time that the Government came clean and gave more precise answers to the questions which are regularly asked about British Leyland, bearing in mind the Secretary of State's responsibility? Is the Secretary of State aware that Conservatives are increasingly coming to the view that the leadership in British Leyland is coming not from the Government, the Chief Executive or the board of management but from those workers who want to work on Saturdays and other occasions, even if they do not get paid, and who would prefer to see all shop stewards made redundant?

Mr. Varley: The hon. Gentleman should know—he probably does—that there is a great deal of co-operation among all levels of the work force in British Leyland. As I have told the House on previous occasions, in the first instance the monitoring of British Leyland's performance is for the National Enterprise Board. The NEB in turn will report to the Government and in due course I shall make known its views on such matters as are commercially proper to be made known to the House.

Mr. Rooker: Does my right hon. Friend accept that, if good use is to be made of the taxpayers' money which has already been put into British Leyland and which will be put into British Leyland, manpower agreements need to be more flexible so as to implement the recommendations of the Ryder Report? Will my right hon. Friend consider relaxation of the present pay policy and the proposed pay policy for companies which arc controlled by the NEB?

Mr. Varley: No, Sir. It is not for me, in answer to this question, to comment in detail on the pay policy. One of the conditions of the next phase of the pay policy, which I know my hon. Friend supports, will be to allow for more flexibility. Those negotiating on behalf of the Government and the TUC tried to have in mind a flexible arrangement within a tight structure. Although the policy probably does not go as far as my hon. Friend and some trade union leaders would like, it will, I believe, get wide acceptance throughout the country.

Mr. Heseltine: The Secretary of State refers to "well-known conditions", but no one knows the conditions upon which a new tranche of money might be given to British Leyland. No one knows how much it will be, or when it will be given. Will the Secretary of State respond to the demand on both sides of the House for the publication of guidelines so that we may all be part of the monitoring process which at the moment is being carried out by an agency of Government?

Mr. Varley: I have said in the House on many occasions that in the first instance the NEB will monitor the performance of British Leyland. I shall make available to the House as much information as is prudent within the commercial operations of British Leyland. The hon. Gentleman must get away from this constant carping at the activities of British Leyland and British Leyland workers. It all the votes cast by the Tory Opposition against Government proposals had been successful, British Leyland and the whole British motor car industry would be in a state of disintegration.

Mr. Alexander Fletcher: Will the Secretary of State tell us what incentive exists for managers and workers in viable companies in Britain to continue to work hard to make a success of their companies when they see so much money being given in Government subsidies to inefficient organisations such as British Leyland?

Mr. Varley: I suppose that the logic of that would be that the hon. Gentleman could contemplate the closing down of Britain's largest single exporter. That is really what he is suggesting when he makes criticisms of that kind. It is about


time the hon. Gentleman and other Conservative Members put their hearts and minds to making sure that we have a profitable motor car industry with a good long-term future.

Textile Areas (Industrial Development)

Mr. Madden: asked the Secretary of State for Industry what specific proposals exist to increase industrial development in textile areas, particularly in West Yorkshire, which have been subject to mill closures and redundancy in recent years as a result of the operation of the Wool Textile Scheme.

The Minister of State, Department of Industry (Mr. Alan Williams): Regional development grants on new buildings, regional selective financial assistance and Government factories are available in West Yorkshire, as well as assistance to industry under the various industry schemes and under the accelerated projects scheme.

Mr. Madden: Does the Minister realise that that reply will be regarded as unsatisfactory in West Yorkshire? Does he accept that, when public finance is made available to bring about rationalisation, mill closures and redundancy, there is a distinct obligation on the Government to accompany that rationalisation by programmes to boost employment? Will the Minister ensure that if further money is made available under the Wool Textile Scheme there are guarantees from the employers in respect of employment and job creation programmes to combat migration from West Yorkshire to more prosperous areas?

Mr. Williams: I am glad to have my hon. Friend's enthusiastic support for the Government's policy. Unemployment in West Yorkshire is below the regional level and below the national level. Over 6 million square feet of new factory space has been approved since 1st January 1974, offering 6,500 new jobs. Under the Wool Textile Scheme 75 per cent. of the benefits of the scheme have gone to the Yorkshire-Humberside Region. There is a £20 million clothing scheme, much of the benefit of which will go to this region because 16 per cent. of the industry is there. Furthermore, industry is beginning to feel the benefit of the up-

turn. In the circumstances, I do not think that I need to apologise for my answer.

Organising Committee for British Aerospace

Mr. Ron Thomas: asked the Secretary of State for Industry what qualities he looked for in deciding the appointments made to the Organising Committee for British Aerospace.

Mr. Terry Walker: asked the Secretary of State for Industry when will he be making further appointments to the Organising Committee for the nationalised aerospace industry.

Mr. Kaufman: The members my right hon. Friend has appointed have among them a wide range of relevant experience in the aircraft industry, the trade unions and other industries. My right hon. Friend is considering further appointments to the committee.

Mr. Thomas: I thank my hon. Friend for his reply, but is he aware that there is a report in one of the Bristol newspapers—one which can be relied on for accuracy—of a statement by the BAC chairman, Mr. Allen Greenwood, who, it is said, is destined to be the deputy chairman of British Aerospace—in which he said in no uncertain terms—

Mr. Speaker: Order. Is the hon. Gentleman quoting from a newspaper? Quoting from documents is out of order at Question Time.

Mr. Thomas: —that he was categorically still opposed to nationalisation? My hon. Friend the Member for Kings-wood (Mr. Walker) and I have been asking many Questions. Is it a condition for appointment to a nationalised board that a person must be opposed to the principle of public ownership?

Mr. Kaufman: I have had the opportunity of discussing this matter with Mr. Allen Greenwood, who assures me of his total dedication to the success of British Aerospace under public ownership.

Mr. Adley: Will the Minister confirm that the people he appoints to the board are there to act as business men in the best commercial interests of the company and are not civil servants or arms of


Government? Even though the Government may not welcome everything they say, will the Government preserve their right to say whatever they think? Will the Minister reject the doctrinaire and spiteful view put forward by his home-owning friend, the hon. Member for Bristol, North-West (Mr. Thomas)?

Mr. Kaufman: My hon. Friend is nothing like as doctrinaire and spiteful as is someone who makes disgraceful personal references and indulges in personal smears. Although my hon. Friend and I do not always necessarily agree upon all aspects of how the British aircraft industry should be publicly owned, we agree upon the basic methods. What is more, my hon. Friend has played a very important part in bringing about public ownership of the aircraft industry.

Mr. Walker: Will my hon. Friend consider appointing people from the shop floor and the trade unions so that there is a good mix on the board?

Mr. Kaufman: In my discussions with the Confederation of Shipbuilding and Engineering Unions I have made clear my great concern that shop stewards and lay members shall be associated with the preparation for nationalisation in cooperation with the Organising Committee. What happens after nationalisation will depend on the way in which the industrial democracy proposals which I hope to bring before the House on Report are implemented.

Mr. Donald Stewart: Is the hon. Gentleman aware that there is resentment in the Scottish aviation industry that there is no representative from Scotland on the board? Will he put that right in the next round of appointments?

Mr. Kaufman: It would be helpful to us in dealing with the Scottish aspect if the Scottish National Party reversed its attitude of opposition to nationalisation and supported the Government. We should then greatly welcome the SNP's co-operation in bringing the industry into public ownership.

Mr. Thorne: Will the Minister confirm that the dedication to which he referred will be best promoted by much earlier consultation with the rank and file of the trade unions? Therefore, will he carry out consultation prior to Report

so that we can ensure that when it becomes law the Bill will reflect rank and file opinion in the aerospace industry?

Mr. Kaufman: As my hon. Friend knows, I have taken part in many consultations in the industry with the shop stewards of 12 different factories and companies, including one in the area represented by my hon. Friend the Member for Preston, South (Mr. Thorne). I have emphasised to everybody concerned the importance of the views of lay representatives of workers being fully associated with bringing the industry into public ownership.

Mr. Heseltine: Will the Minister under. stand that in making appointments to the Organising Committee for British Aerospace the Secretary of State for Industry has given considerable hope to a number of people who would like jobs in publicly-owned nationalised industries, but that the tragedy for the industry and the country is that those people are sitting on the Government Back Benches?

Mr. Kaufman: I suppose those remarks were meant to be funny, but I cannot understand how at the moment. What interests me is that the Tory Party went on and on saying that we could not get suitable people to serve on the Organising Committee, but we now have an outstanding nucleus of people on that committee so that many shop stewards will be able to play an important part in the industry. However, all the Conservatives can now do is to knock that achievement.

Rolls-Royce (1971) Ltd.

Mr. Rost: asked the Secretary of State for Industry how much public money has been invested, to date, in Rolls-Royce (1971) Ltd.

The Under-Secretary of State for Industry (Mr. Les Huckfield): A sum of £230·3 million of which £16 million is equity and £.69·3 million is loan.

Mr. Rost: Since earlier replies have confirmed our worst fears that we are unlikely to have an airframe industry in this country because the Government will be too late to join a collaborative project with Europe or America, may we at least be given an assurance that there


will be an aero-engine industry by funding the urgently-needed intermediate fan project to provide aero-engines for the new generation of world airliners?

Mr. Huckfield: The best guarantee for the future of the aerospace industry is the nationalisation as soon as possible of the aircraft industry. Future projects are a matter for discussion in the first stage with the National Enterprise Board, but no definite proposals have been received by the Government as yet.

Mr. loan Evans: In fairness to the former Conservative Government, does my hon. Friend agree that they were justified in taking Rolls-Royce into public ownership and that they ignored the nonsensical doctrinal theories of the Tory Party on the subject of public ownership? Why is it that the Tory Party does not mind if British industry is taken over by Tokyo, Texas or Timbuctoo, but objects when the British people seek to own British industry?

Mr. Huckfield: Even Conservative Members are capable of learning from the experience of their own Government in office.

Mr. Grylls: Will the Minister tell the House why it has taken six months to decide the price at which Rolls-Royce shares are to be transferred to the National Enterprise Board?

Mr. Huckfield: If the hon. Gentleman will table a separate Question on that subject, I shall be only too happy to answer him.

Motor Industry

Mr. Grylls: asked the Secretary of State for Industry if he will make a statement on Government policy towards the motor industry.

Mr. Alan Williams: The policy of the Government towards the motor industry remains as outlined in the White Paper on the industry published in January.

Mr. Grylls: Will the Minister confirm the view he held at the time of the Chrysler rescue operation that it would be better if the rest of the motor manufacturers remained under multinational companies? If that is still his view, will he resist the pleas of the Labour Party for

the Government to nationalise Ford, Vauxhall and Chrysler as well—in other words, will he stick to his original statement?

Mr. Williams: The hon. Gentleman will bear in mind that at that time I was not in my present Department. But I agree completely with the policy pursued by my Labour colleagues. I am aware of no proposals at Government level of the kind he suggests and I have nothing more to add.

Mr. Michael Marshall: What is the Minister doing to obtain variations in the Price Code to assist not only the motor industry but industry in general to obtain a better level of profit and investment and to provide more job opportunity?

Mr. Williams: Discussions are now taking place, and my right hon. Friend the Secretary of State for Prices and Consumer Protection and Paymaster-General has been negotiating with industry and discussing the possibilities of changes in the code. But the overwhelming benefit to industry will come from defeating inflation, which must be the main priority. I remind the House that it was a Labour Government who introduced the allowance for investment under the Price Code.

Mrs. Dunwoody: Will my hon. Friend take a quiet look at the Finance Bill provisions on this matter, which seem to contain certain difficulties for motor car firms such as Rolls-Royce? Although we wholly accept and strongly support any suggestion against unfair "perks", we believe that it would be unfortunate if this foremost export company, 60 per cent. of whose products go overseas, were unwittingly damaged in this way.

Mr. Williams: My right hon. Friends the Secretary of State for Industry and the Chancellor of the Exchequer accept that there must be no unnecessary damage to the industry. For that reason my right hon. Friend and the Department are having discussions with the industry about the implications of the proposals. Equally, we must be sure that the taxation system is fair.

Mr. Hal Miller: Will the Minister say what is the Government's policy towards the serious over-capacity in the motor industry, a topic to which reference has


been made in evidence to a Select Committee by the Chief Executive of British Leyland and by Ford representatives?

Mr. Williams: The hon. Gentleman is correct. There is over-capacity, as has been indicated in the White Paper. What is now happening, again indicated in the White Paper, is that the Government have asked all companies to undertake a plant —by—plant study in consultation with their work force and to recommend to the Government company—by—company steps which may assist the future of the industry.

Mr. Rooker: If the effect of the Finance Bill is that more Rolls-Royces are exported, what is wrong with that?

Mr. Williams: My hon. Friend is correct to say that we want growth through an export-led boom. We do not want to damage the domestic market for cars, but we have to be fair in our taxation system.

Scottish Council (Development and Industry)

Mr. Crawford: asked the Secretary of State for Industry when he next intends to meet the Scottish Council (Development and Industry).

Mr. Williams: I am always prepared to meet the council when there is a need to do so.

Mr. Crawford: Is the Minister aware of the excellent work carried out by the Scottish Council in highlighting the inherent dangers in the increasing centralisation in London of decision-making affecting Scottish industry? Does he not agree that the implacable hostility expressed by many Labour Members, and even more by members of the Conservative Party, towards the establishment of a Scottish Assembly will make the Scottish Council's task in this context more difficult, if not impossible, to sustain?

Mr. Williams: I know that the hon. Gentleman has a vested interest in trying to create a national persecution complex. I must remind him in regard to regional assistance that Scotland receives twice as much help per head of population as does England.

Mr. Grimond: When the Secretary of State meets the Scottish Council will he

discuss means by which production and productivity can be increased? In that connection will he discuss how those who actually produce can be assisted against those who expand by reason of their being on annual increments, with index-linked pensions, and who appear to be at a great advantage under the prices and incomes policy?

Mr. Williams: I would remind the right hon. Gentleman that there is a development agency which will undertake work in regard to Scottish industry. As for improving the efficiency of the industry generally, we are carrying out normal studies in the NEDC in 39 sectors.

Mr. Buchan: Will the Minister bear in mind that the Scottish Council has rejected the SNP's policy of separation, especially, I suspect, since the hon. Member for Perth and East Perthshire (Mr. Crawford) used to work for the council? Would he ask the council whether it approves of the slogan "Put Scotland First" when spoken by SNP Members from the driving seat of a Japanese Datsun or a Swedish Volvo?

Mr. Williams: We know that the objective of both nationalist parties is separation. It is an objective that we reject.

Greater London

Mr. Molloy: asked the Secretary of State for Industry what is his policy for assisting industry to move into the Greater London area; and if he will make a statement.

Mr. Man Williams: We must continue to give priority in the steering of new projects to the assisted areas, which have greater problems. But the raising of the IDC exemption limit from 5,000 sq ft. to 12,500 sq. ft. in the South-East from 1st May should help London.

Mr. Molloy: Is my hon. Friend aware that this is a case of the grass growing but the horse starving? Does he realise that large tracts of land in Greater London formerly used for industrial purposes and to which industry could have been attracted are now being used for the construction of vast warehouses? Does my hon. Friend appreciate that when the upturn in the economy comes there will not be any space in the Greater


London area to which manufacturing industry can return? Will he please bear that in mind?

Mr. Williams: I am aware of my hon. Friend's interest in this matter. I know of the expansion of this type of development that has taken place in his constituency. Nevertheless, the unemployment trouble in London is of a recessional rather than a structural nature. The upturn will probably lead to a massive reduction in unemployment in London. I would ask my hon. Friend to bear in mind that unemployment in London is still below that of the South-East generally and below the national figure.

Mr. Anthony Grant: Is the Minister aware that the rise in unemployment in Greater London and the South-East has been of the order of 150 per cent. and, in the past two years, has been the fastest increase of any region in the country? Apart from the need to encourage industry to return, will the hon. Gentleman also recognise that in a place like London commercial development has a part to play? Will he bring pressure to bear on his colleagues in the Department of the Environment to alter their absurdly rigid ODP policy, which is working adversely for the area generally and for Harrow in particular?

Mr. Williams: The hon. Gentleman will appreciate that while we can make political claims about the rate of increase of unemployment, it is generally recognised that the international recession is a major factor and that equally, because of the structure of industry in London and the South-East, there is little doubt that in an upturn substantial benefit will accrue to both areas.

British Steel Corporation

Mr. Canavan: asked the Secretary of State for Industry when he next expects to meet the Chairman of the British Steel Corporation.

Mr. Varley: I met the chairman on 28th April. No date has been arranged for a further meeting but as and when necessary I meet the chairman on a wide range of matters affecting the corporation.

Mr. Canavan: Will my right hon. Friend try to arrange a meeting with the

Chairman of the British Steel Corporation to discuss the fears expressed at last week's NEDC meeting about a possible shortage of steel once the economy starts to pick up again? In particular, will my right hon. Friend stress the importance of British Steel being able to produce, for example, the 800 miles of gas pipeline which will run from the fields in the North Sea to the North-East of Scotland? Is he aware that in the past British Steel has had a pretty poor record in winning underwater pipeline contracts of that nature?

Mr. Varley: I was at the NEDC meeting referred to by my hon. Friend and heard the comments made by some members. It is fair to say that Sir Monty Finniston asked that people should be much more specific about the shortage of steel that they were envisaging. I know that he is prepared to look into this immediately specific proposals are made.
As for North Sea contracts and work on the gas pipeline recently announced by my right hon. Friend, in the first instance it is for British Steel to decide about this project. I shall urge it to look for any profitable work which is available there. I imagine that it depends on the specifications.

Mr. Tim Renton: When the right hon. Gentleman meets Sir Charles Villiers, Sir Monty Finniston's successor, will he promise him some security of tenure so that he may speak his mind freely? Will he also discuss with him the now widely-held view that the major capital expansion plans of BSC are so delayed and inflated in price that it will be hard for the corporation ever to compete with the larger plants now installed in Japan and the EEC?

Mr. Varley: The terms of the appointment of Sir Charles Villiers have been announced and I do not think I have anything further to add to them. I know that some concern has been expressed in varying quarters about the delays, particularly in relation to the Port Talbot and Shotton arguments. The Government will announce their view on that in due course. The hon. Gentleman is wrong to suggest that major investment projects have been held up within the British Steel Corporation. I gave figures on the last occasion I answered Questions


which showed that the year-on-year investment had been maintained and had increased in the British steel industry.

Mr. Hooley: When my right hon. Friend meets the Chairman of the British Steel Corporation, will he say not that the Port Talbot scheme will be dealt with "in due course" but that the Government are getting on with this matter? Is he aware that this is a vitally important investment scheme which the Government and not BSC are holding up?

Mr. Varley: I am anxious to give the British Steel Corporation as much support as possible. My hon. Friend will know of the major social implications involved in the Port Talbot development and how they affect Shotton. We need to look into this development much more closely. My hon. Friend knows that when we were in opposition we gave a specific undertaking, which we are now honouring, to look not only at the economic case but at the social case involved in this proposal.

Mr. Teddy Taylor: If the right hon. Gentleman and the Government really believe in decentralisation, why do they not issue a general direction to the Chairman of the British Steel Corporation telling him to move at least part of the massive bureaucratic and expensive British Steel headquarters from the centre of London to one of the areas where steel is produced? Would not that do more good to the steel industry in Scotland and other steel-producing areas than the Government's daft proposals for devolution, which were so brilliantly condemned by my right hon. Friend the Leader of the Opposition on Saturday?

Mr. Varley: I am certainly not getting involved in that argument. As to managerial and organisational changes within the corporation, I know that the hon. Gentleman will be aware that the corporation announced changes a few weeks ago as a result of which it has established a Scottish division in Glasgow.

Mr. Leadbitter: Does my right hon. Friend agree that he has a responsibility to look very much more closely at the question by my hon. Friend the Member for West Stirlingshire (Mr. Canavan) about the gas pipeline? If the Japanese can find such work an attractive commercial proposition and British Steel can-

not, is there not something wrong? Will my right hon. Friend bear in mind that the pipe-making facilities in Hartlepool are not being fully worked and that the investment programme announced last year by the Government is not being pursued by the corporation?

Mr. Varley: I do not know of the specific point about investment programmes not being pursued in my hon. Friend's constituency. The Government will be urging the corporation to do everything possible to obtain any available profitable work resulting from opportunities in the North Sea.

South Yorkshire

Mr. Edwin Wainwright: asked the Secretary of State for Industry what projections he has made of the likely level of industrial activity in the South Yorkshire area.

Mr. Alan Williams: The level of industrial activity in South Yorkshire will depend largely on the success of our policies for reducing inflation and on our international competitiveness.
Projects for which industrial development certificates have been granted since January 1974 were expected to provide some 5,200 jobs over a period of three years from the time of the approval of the certificates. In addition, further jobs will arise from smaller investments which do not require IDCs.

Mr. Wainwright: Is my hon. Friend aware that, in spite of what he says, the number of jobs available in South Yorkshire, especially in my constituency of Dearne Valley, over the past few years has declined? Is he further aware that industrialists have applied to his Department for help but that it has not been forthcoming? Will he make sure that a special report is called for from his officials in Yorkshire about the lack of jobs in South Yorkshire, with special reference to the Dearne Valley constituency?

Mr. Williams: My hon. Friend will bear in mind that altogether about 8,000 jobs have been created under the Industry Act. He will also bear in mind that we have been going through a recession, and loss of job opportunity has faced large areas of the country and is a feature that we want to reverse. If my


hon. Friend will let me have details of any particular industry to which he would like to call my attention, I shall be happy to examine them.

Mr. Michael Marshall: Does not the hon. Gentleman appreciate that the level of industrial activity in South Yorkshire will certainly be improved if his right hon. Friend will get on and make a decision about Port Talbot? Is he aware that such a decision would provide additional employment for the plant makers, many of whom are in South Yorkshire? What is the reason for this delay, now amounting to 18 months? It is disgraceful. What are the Government doing about it?

Mr. Williams: It is important that we get the decision right.

Mr. John Mendelson: My hon. Friend is quite right to say that the general recession has much to do with the position in South Yorkshire. Will he convey to his right hon. Friend the urgent need to change Government policy and to see to it that in South Yorkshire more jobs are provided in industries like the construction industry by a policy of controlled reflation? Does he realise that there can be no easy-going way to improve the position in South Yorkshire or anywhere else if the Government stick to their limited negative policy?

Mr. Williams: I am afraid that there is no easy-going way to improve the prospects for the country as a whole. The upturn has to be export-led and we must take advantage of it when it comes. I cannot offer easy-going instant solutions to the problem.

LEGAL AID

Mr. Tim Renton: asked the Attorney-General whether he is satisfied with the workings of the legal aid system.

The Attorney-General (Mr. S. C. Silkin): My noble and learned Friend is satisfied that the legal aid system has made an immense contribution to enabling people of limited means to obtain justice in the courts. He is fully aware of its limitations and it is his policy, as and when resources permit, to improve the system.

Mr. Renton: Does not the right hon and learned Gentleman think that the

definition of those who qualify for civil legal aid and those who do not is too tightly drawn and that there is a very firm cut-off point for maximum disposable income? Will he adjust this?

The Attorney-General: The financial limits of eligibility are now being examined by the Lord Chancellor's Legal Aid Advisory Committee. A working party has been set up to review the whole of the financial conditions relating to the legal aid scheme, and we should await its report.

Mr. R. C. Mitchell: When can we expect to get that report? A number of people ought to be receiving aid or more than they are receiving, and they are thereby handicapped from taking action in the courts.

The Attorney-General: As I have said, I am aware that there are many limitations that one would want to remove, of which the financial limit is only one. My noble and learned Friend the Lord Chancellor is giving urgent consideration to the whole question of legal aid. I cannot say when the report will be ready.

Mr. Adley: Does the right hon. and learned Gentleman have any views on the rights of people who may wish to purchase or sell houses without using solicitors but wish to do so through the organisation of which the hon. Member for Ipswich (Mr. Weetch) is president?

The Attorney-General: That is an entirely different question.

Mrs. Dunwoody: While my right hon. and learned Friend is encouraging the Lord Chancellor to hurry on with the report, will he also have a gentle word with the legal profession about the time it takes on legal aid cases? There is another form of difficulty here, because anyone on legal aid has to wait longer for services than someone who is paying his advisers, and people on legal aid therefore think that they are being badly treated in this way.

The Attorney-General: I assure my hon. Friend that our noble and learned Friend needs no reminder from me about the urgency of improving the legal aid system. Indeed, he speaks again and again, quite rightly, on the subject and is fully aware of the need. I am surprised to hear what my hon. Friend says about


the time taken on legal aid cases, except to the extent that time is always taken in satisfying the legal aid authorities that an application is justified and that the needs of the applicant are within the limits. If, however, my hon. Friend has any particular case in mind, I hope that she will let me have the facts and I will look into it.

SOUTHERN PLACEMENT SERVICES LTD.

Mr. Robert Hughes: asked the Attorney-General if the Director of Public Prosecutions has yet completed his investigations into the activities of Southern Placement Services Ltd. in relation to breaches of sanctions regulations on evidence supplied by the hon. Member for Aberdeen, North.

The Attorney-General: Yes. The Director of Public Prosecutions has concluded that there is no evidence presently available to support a prosecution under the sanctions Order against any person within the jurisdiction.

Mr. Hughes: That is a disappointing answer. Has the Director of Public Prosecutions taken into consideration the legal responsibility of the newspaper proprietors who take such advertisements for commercial gain? Am I right in suggesting that my right hon. and learned Friend's answer means that there is no jurisdiction here in the sense that those who place the advertisements are abroad? Is there not a responsibility on the newspaper proprietors in this country?

The Attorney-General: Of course there is a responsibility, and any possibility of a prosecution has been fully taken into account by the Director of Public Prosecutions in consultation with my hon. and learned Friend the Solicitor-General. The position of the newspapers has been very carefully considered, but, having read the advertisements, I must agree with the Director of Public Prosecutions and the Solictor-General that no prosecution could be entertained.

Sir David Renton: Can the right hon. and learned Gentleman confirm that it cannot be treasonable or in any way criminal for a British subject to volunteer to defend British territory?

The Attorney-General: That is a totally different question from the one put to me, and I am not prepared to answer it now.

CRIMINAL LIBEL

Mr. Sedgemore: asked the Attorney-General what advice he has given to the Director of Public Prosecutions in connection with proceedings in connection with actions for criminal libel.

Mr. McCrindle: asked the Attorney-General what advice he has given to the Director of Public Prosecutions in connection with proceedings relating to actions for criminal libel.

Mr. Madden: asked the Attorney-General what advice he has given the Director of Public Prosecutions over criminal libel actions against newspapers and magazines.

The Attorney-General: I have given no advice to the Director of Public Prosecutions in connection with proceedings for criminal libel. We have discussed the proceedings which have been commenced against Private Eye, and in particular the suggestion that the Director should take them over. We are agreed that the public interest does not require him to do so.

Mr. Sedgemore: Can my right hon. and learned Friend say what public purpose this serves by bringing into the public domain the private squabbles between fringe bankers and satirical magazines?

Mr. Speaker: Order. If the hon. Gentleman is referring to a case under way, it is sub judice.

Mr. Sedgemore: I am referring to private squabbles generically and not individually, Mr. Speaker. What do the Director of Public Prosecutions and the Government intend to do about the criminal libel law, which is an affront to the Bill of Rights and a totally unnecessary invasion of the liberties of the individual and the freedom of Press?

The Attorney-General: I must have regard to your ruling on this matter, Mr. Speaker, but if my hon. Friend is asking me about amendment of the law I must


point out that that is a matter for my right hon. Friend the Home Secretary and not for me.

Mr. Maxwell-Hyslop: Did not the recent report of the Royal Commission on Defamation dispel the widely-held belief that a prosecution required action by the Director of Public Prosecutions? Can it not be brought in the normal way, like any other criminal prosecution, by the local police? Is it not untrue to say that such a prosecution needs the Attorney-General's fiat or action by the DPP, and is it not like any other ordinary criminal offence?

The Attorney-General: I was not aware that there was any such widely-held belief. If there was, it was wrong.

Mr. Madden: Would not my right hon. and learned Friend agree that the use of criminal libel proceedings can be embraced by godfather-like figures in the City and big business to silence the Press? Would he not further agree that Press freedom could be defended and enhanced if our archaic libel laws, civil and criminal, were urgently reformed?

The Attorney-General: The Faulks Committee, which has reported on this issue, does not propose that the law should be changed. On the general question raised by my hon. Friend, it is for my right hon. Friend the Home Secretary to put forward proposals for amendment of the criminal law, and not for me.

Mr. Lipton: Without reference to any proceedings which may be pending, may I ask my right hon. and learned Friend whether he does not think that the time has come when proceedings for criminal libel should be undertaken only by the Director of Public Prosecutions or, if not, abolished altogether?

The Attorney-General: I can only repeat that it is a matter for my right hon. Friend the Home Secretary.

POLICE OFFICERS (ALLEGED OFFENCES)

Mr. Hooley: asked the Attorney-General what criteria or guidelines are used by the Director of Public Prosecutions in order to determine whether or not to proceed to prosecute a policeman against whom a criminal offence has been alleged.

The Attorney-General: The Director of Public Prosecutions makes no distinction between a police officer and any other person in deciding whether or not a prosecution should be brought. In every case, the broad criteria are whether the evidence is sufficient to justify a prosecution and whether proceedings are required in the public interest.

Mr. Hooley: Is it not the case that the Director of Public Prosecutions requires much more rigorous and comprehensive evidence of an offence before he is prepared to undertake any kind of prosecution against a policeman against whom a crime has been alleged? Is he not falling into disesteem? Does not some investigation need to be carried out?

The Attorney-General: With regard to the first question, I am certainly not aware of the point my hon. Friend has made. It is not in accordance with my own experience of the matters which come to me either from the Director or from any other source with which the Director of Public Prosecutions is involved. As to the second question, I do not share my hon. Friend's view.

Mr. Percival: May I assure the Attorney-General, in regard to the last part of his answer, that this is also our experience on this side of the House? We have no reason to believe that the office of the DPP is falling in esteem at all. [Interruption.] Hon. Gentlemen may laugh—[Interruption.] —

Mr. Speaker: Order. Hon. Members will have to laugh after Question Time, because we are running out of time.

Mr. Percival: The Attorney-General can be assured that we welcome his statement that all cases are judged by the same standards, whoever is involved in in them. This policy is obviously doubly important in the light of what we have


seen this afternoon, when hon. Gentlemen have tried to pursue individual cases because of the particular persons involved.

The Attorney-General: I can only agree with the point made by the hon. and learned Gentleman.

NORTHERN IRELAND

Mr. Neave: (by Private Notice) asked the Secretary of State for Northern Ireland if he will make a statement amout the terrorist murders of 13 people, including four members of the RUC, during the last weekend.

The Minister of State, Northern Ireland Office (Mr. Roland Moyle): The past three days have seen a series of particularly brutal incidents in Northern Ireland. Since Saturday morning, five policemen and eight civilians have been killed. In addition, over 50 people, including three policemen and a five-year old girl, were injured, some very seriously.
The first incident occurred in the early morning of 15th May. Three policemen were killed and a fourth was seriously injured by an explosive device in the follow-up to an earlier shooting incident near the police station at Belcoo in County Fermanagh. Later on Saturday there were a number of bombing attacks against public houses in Belfast and Counties Armagh and Tyrone. Which resulted in the deaths of five civilians and 48 injured. The most serious attacks occurred in the Avenue Bar in Belfast, when two people were killed and 22 injured, and Clancy's Bar in the village of Charlemont in County Armagh, where three people were killed and 14 injured.
On Saturday evening, a policeman was killed and two others injured when their patrol car was ambushed near Warren-point in County Down. On Sunday evening an off-duty full-time member of the RUC Reserve was shot dead at his home at Benburb in County Tyrone. This morning two men were shot dead at their business premises in Moy in County Tyrone.
The House will join me in expressing sympathy to the relatives of those who have been murdered in this latest spate of senseless killing, and in paying tribute to the five members of the RUC who have so gallantly laid down their lives in the

service of the whole community. Their sacrifices will not be in vain.
Let me assure the House that the cold-blooded murders of policemen and the crimes of sectarian gangsters will not deflect the Government or the security forces from our course in Northern Ireland. We are determined that the rule of law will prevail and that those who commit these brutal acts will be brought to justice. Despite these cowardly attacks the morale and determination of the RUC is high. They deserve the unstinted support of the whole community and of this House.
The Secretary of State had a meeting this morning with the General Officer Commanding, Lieutenant-General Sir David House, and the Chief Constable, Mr. Kenneth Newman. The Secretary of State agreed that the increasing effectiveness of the police represents a continuing process towards a long-term objective and cannot be achieved hastily. The core of the policy is to secure the conviction of terrorists through the use of the criminal law in the courts. The process cannot be based on some arithmetical equation involving an automatic and simultaneous reduction in the number of soldiers as the strength of the RUC increases.
The rôles of the Army and the RUC complement one another. Both are needed. The RUC is not intended to be, and will not be, a para-military force. The details of the changes are still the subject of study by a Government working party, but the essential objective is clear: to make the RUC still more effective in its proper role of law enforcement.
Whatever they may claim, the real reason why the leaders of the Provisional IRA have ordered attacks on members of the RUC is that they have no policy other than violence. They fear the success which the RUC is already having in bringing members of the Provisional IRA to justice. The events of the weekend have demonstrated once again how the Provisional IRA's actions bring down retaliation in the minority community whom they claim, but are powerless, to protect. Retaliation itself is equally abhorrent. We condemn it, as we have always condemned violence from whatever source it comes.

Mr. Neave: In offering our sympathy to the families of the victims of what


some people still call a ceasefire, may I ask the Minister of State whether he is aware that after this last shocking weekend, tough and really quick decisions are needed, including a decision to have no more contacts between the Government and terrorist organisations?
We agree with the Minister of State that the RUC should not be deterred by this setback, but will he say why no decision has been announced about providing the RUC with better equipment if it is to replace the Army in certain areas in Northern Ireland?
Will the Minister of State also explain the delay in announcing co-ordination between the Army, the UDR and the police, so that selected men can be specially trained in anti-terrorist measures? Is it not horrifying that the Government's anti-security policy has not, after several years, been able to protect innocent people in the way that he suggests?

Mr. Moyle: Concerning the equipment for the RUC, it is for the RUC to make out its case to the police authority. There is no reason at all why it should not be able to do so. We have provided it with all the equipment for which it has asked. The question of equipment for the RUC is an ongoing matter and subject to continual review.
This is the case also with regard to coordination between the RUC, the Army and the Ulster Defence Regiment. In that there are different situations and that the nature of violence has changed, this is a matter for continual review by the security forces. The operational deployment of the forces and their co-ordination is a matter for the forces concerned, and we have always provided them with the necessary facilities in order to achieve whatever co-ordination they desire. The level of co-ordination they have at the moment is that which the security forces have desired for themselves.

Mr. McNamara: Is my hon. Friend aware that everybody in the House shares in his expression of sympathy to the relatives of people who were killed and maimed in the recent tragedies? Will he confirm, however, that in many ways these attacks are a tribute to the work of my right hon. Friend and his predecessors in establishing the RUC as an

independent force, separate from political interference and seeking only to ensure that we have the rule of law impartially throughout the community, and that, therefore, in order to try to defeat this object, the terrorists are turning their attention to the RUC?
Will my hon. Friend also comment on the degree of co-operation there has been with the Southern Irish Government with regard to the problem of Belcoo?

Mr. Moyle: I agree with my hon. Friend's suggestion that the real reason for the Provisional IRA turning its attention to the RUC is to some extent that the RUC has been so successful in bringing people to justice through the courts. The rate of success has been improving with each month that passes. Over 450 people have been charged with terrorist offences in the Province this year, and 47 have been charged with murder. In a sense my hon. Friend is right to say that this is a tribute to the increasing officiency of the RUC. Indeed, the efficiency of the RUC has been increasing over a number of years.
I was asked about co-operation with the South. Co-operation this last weekend with the security forces in the South has been particularly good. It has been very close in regard to searches for explosives. In addition, the security forces in the South are willing to cooperate to the maximum in ensuring that the people who perpetrated the Belcoo attack are brought to justice.

Mr. McCusker: Will the Minister not agree that if the present conflict is not to degenerate into further acts of retaliation, the frustration of the law-abiding community must be channelled into positive law-abiding anti-terrorist activity? Will the Minister reconsider some of the points made by the hon. Member for Abingdon (Mr. Neave)? Will the Minister agree that it does not matter whether he, this House or anybody else believes that the RUC should be a civilianised police force but that if it is to be a murder target of the IRA it must be armed to protect itself?

Mr. Moyle: On the last point, the RUC are certainly armed and equipped to protect themselves from all sorts of attacks. As for considering ideas, from whatever quarter they come, we have


asked all the political parties in Northern Ireland to make their contributions in terms of ideas to the working party which is considering the future development of law and order policy and of policing policy. These will all be taken into consideration in working out the further steps in Government policy.

Mr. Alan Lee Williams: Will my hon. Friend confirm the impression gained by a number of Labour Members who visited Northern Ireland over the weekend that the security forces fully support the idea of the primacy of the police but that they are deeply concerned in their terrible role out there with co-operation with the Southern Irish authorities? Can my hon. Friend impress upon those in authority at the other end of Ireland that their co-operation in this respect is much needed if there is to be a successful conclusion of the gun running and the running of other explosives across the border?

Mr. Moyle: My hon. Friend takes a great interest in these matters and no doubt will have noted the speech by the Taoiseach over the weekend and the comments of Mr. Garret FitzGerald. These have backed up the co-operation which we have had this weekend across the border. Over recent months, co-operation between the security forces in the North and the South has improved immeasurably, and I am sure that it will go on improving. I confess that I do not detect the concern which my hon. Friend sensed among the security forces, except to the extent that better things can always be improved.

Rev. Ian Paisley: As the Secretary of State for Northern Ireland has gone on record as saying that those guilty of the murder of the policemen at Bencoo came from the South of Ireland, and in view of the strong statements, which have been welcomed in Northern Ireland, by the Prime Minister of the Republic and his Foreign Secretary at the weekend, would not this be an appropriate time to pursue those statements and to renew talks with the Dublin Government about an extradition treaty?

Mr. Moyle: As opposed to extradition, we have joint Acts of Parliament of the Dail and of this Government allowing for trials of criminals in the Republic and in the United Kingdom for acts com-

mitted in the opposite territories. I think that that is where we shall take our stand.
There is no need to reopen talks with members of the Government in the South. These are continual and ongoing.

Mr. Mellish: We all understand, of course, that there is no simple solution to this problem. If there were, this House would have found it. The only way in which this carnage and murder will end is when certain people with responsibility in that great Province of ours, both the Catholic hierarchy and people such as the hon. Member for Antrim, North (Rev. Ian Paisley), start talking peace not only in this House but to their own people back in Ireland, pleading with everything that they have, rather than continuing the festering hatred on the basis of religion. Until that is done, there cannot be a solution. The story of this weekend is a repetition of everything that we have heard in this House again and again. When will those responsible, who can bring about peace, take some real action?

Mr. Moyle: I am sure that my right hon. Friend's remarks will have been noted by those to whom they were addressed.

Mr. Powell: Is the hon. Gentleman aware that those who commit these out-rages have not the slightest interest in peaceful co-operation between the different sections of the community in Northern Ireland and that they would endeavour to destroy co-operation by any means in their power?

Mr. Moyle: I agree with the right hon. Gentleman.

Mr. Maurice Macmillan: Was not there a slight inherent contradiction in the Minister's original statement? In referring to the supremacy of the Royal Ulster Constabulary as the law enforcement body but not as a para-military organisation, he was at pains to emphasise the difficulty of co-ordination of the various types of security operations. Is it not the moment for the Government to consider much more carefully than they have yet done a suggestion put forward by my hon. Friend the Member for Epping Forest (Mr. Biggs-Davison) that it is high time that we had a unified command in the Province under which the whole of our


anti-terrorist and security could be conducted?

Mr. Moyle: There was no inherent contradiction in anything that I said. In fact I did not draw attention to any difficulties in co-ordinating operations in the Province, which are very well co-ordinated on a sound basis by continual contact between the leadership of the Army and the RUC at all levels. Therefore, I do not think that there is any force in the right hon. Gentleman's suggestion.

Mr. Sandelson: Will my hon. Friend say what policy he has in terms of those areas of trouble such as Belfast and Derry where a good deal of the terrorism is concentrated and where a great amount of housing is derelict or near-derelict, and whether it might not greatly assist the police in their detection, powers of arrest and in bringing these people to trial if much of that housing were demolished and more open space provided to assist the police in going about their work?

Mr. Moyle: My hon. Friend who is responsible for housing in the Province is sitting next to me. I draw attention to the fact that there is a housing Order coming forward with a new policy for the use of housing in Northern Ireland. No doubt my hon. Friend the Member for Hayes and Harlington (Mr. Sandelson) will study that when it comes before the House.

Mr. Michael McNair-Wilson: Is the hon. Gentleman aware how shocked everyone must be by this appalling catalogue of carnage and vengeance killings which still predominate? Can he give an absolute assurance that there will be no further run-down of the security forces? Can he say whether the Spearhead battalion was withdrawn with the support of the security chiefs? Can he say, finally, what thought has been given to creating special emergency areas in and around the border?

Mr. Moyle: I quite appreciate the sense of horror about what the hon. Gentleman quite rightly described as the carnage over the weekend. Those of us associated with the Province on a day-to-day basis are possibly more affected by incidents of this kind even than those who view them from this House. The level of security forces in the Province will always

coincide with the security demands of the operations situation. I can give that assurance.
The Spearhead battalion was withdrawn at the desire of the Army. The hon. Gentleman must remember that the Spearhead battalion is a short-term reinforcement operation. It is in the nature of that fact that at some stage it gets withdrawn for its spearhead rôle.

Sir Nigel Fisher: Can the Minister pinpoint any reason for this increase in the number of murders this weekend? We have had a lot of well-intentioned words from him today. What special action does he intend to take to prevent this sort of thing from going on and worsening, as it is now?

Mr. Moyle: The question of preventing the situation from worsening is one which will engage the security chiefs. The way of limiting casualties in the RUC, the Army and the UDR is a matter for the security chiefs of those forces, and it is for them to deploy their forces as they think best.

Mr. Hastings: Will the hon. Gentleman address his mind again to the suggestion of my right hon. Friend the Member for Farnham (Mr. Macmillan)? Surely the lesson of both Cyprus and Malaya was that a unified command provided the answer? Since these incidents appear to be getting worse, and no one can claim that the security forces for all their efforts are able to stop them, will the hon. Gentleman study this suggestion and give a wider answer than he did before?

Mr. Moyle: I am prepared to study any suggestion that is put forward. However, I might point out that the security chiefs have been in a position to ask for this sort of machinery if they thought it would make a contribution. They have not felt it necessary to do so.

MALAWI (BRITISH PASSPORT HOLDERS)

Mr. Maudling: (by Private Notice) asked the Secretary of State for Foreign and Commonwealth Affairs whether he will make a statement on the treatment of British passport holders in Malawi.

The Under-Secretary of State for Foreign and Commonwealth Affairs (Mr. Evan Luard): There are at present about


6,800 Asian United Kingdom passport holders in Malawi. The Malawian Government have for some time made it clear that, in common with other East African Governments, they wish over a period of years to Africanise the commercial sectors of their economies. Because of the situation affecting British passport holders throughout East Africa, Her Majesty's Government introduced in 1968 a special voucher scheme to arrange for the orderly transfer of these United Kingdom passport holders to Britain. So far as Malawi is concerned, this scheme has worked successfully and until now the treatment of British passport holders in Malawi has, in general, been satisfactory.
Some weeks ago, however, an incident occurred involving Goanese residents in Malawi. Seventy-one of these, with their dependants, have now been declared prohibited immigrants and some have already arrived in this country. The High Commissioner in Malawi has been in close touch with the authorities there and the period over which the families must leave has now been extended to the end of June.

Mr. Maudling: I thank the Minister for that reply. Will he give a categorical assurance that as a result of these events there will be no increase in the overall quota for British passport holders from Africa entering this country? Why are these people being expelled? Is there any discrimination on the basis of nationality or race? Will the Minister contemplate visiting Malawi to thrash out the whole matter with Dr. Banda?

Mr. Luard: I confirm that the group which is being expelled from Malawi will form part of the overall quota of 5,000 passport holders for the whole of Africa. We have been unable to discover from the Malawi Government, despite several efforts to do so, the reason for this group being expelled and the people concerned have been unwilling to give a reason. We have been unable to discover any evidence of discrimination On the grounds of race. [HON. MEMBERS: "Oh."] I am talking about this particular incident and not the general policy of Africanisation which has an element of racial—[HON. MEMBERS: "Oh."] This policy is not unique to Malawi. Very many other countries have introduced similar regulations. We do not consider

that there are, at present, grounds to justify a ministerial visit to Malawi, but in order to discuss the question and to give the Malawian Government some idea of the concern felt about this matter I have asked the Malawian High Commissioner to discuss the question and he is coming to the Foreign Office tomorrow.

Mr. Faulds: Prior to these expulsions, what representations did the Government make to the Government of Malawi before the expulsions about the improper imprisonment of people holding British passports under fake charges and frequently no charges at all, which is the common practice under the dictatorship of Dr. Banda?

Mr. Luard: The Government have made representations on a number of individual cases over a considerable period. If my hon. Friend will give me details of any specific cases that he has in mind, I shall inform him what action has been taken.

Mr. Ronald Bell: Will the Minister confirm that being a citizen of the United Kingdom and Colonies has given no legal right to come into this country since the 1968 Act and possibly before? Will he repeat the assurance which he gave to the House on 13th April and confirm that these people are perfectly able to go back to their own country of India? If he can confirm both these points, why are we arranging to bring them here?

Mr. Luard: The hon. and learned Gentleman must know that arrangements were made, in the first place, by a Conservative Government in the early 1960s to ensure that the Asian people who became citizens of the newly independent African countries were provided with United Kingdom passports and given assurances that they could come to this country. The effect of the 1968 Act was that immigration from Africa to this country was phased over a number of years. We said at that time that it would take about 10 years, and all the indications are that we have kept to that time scale and that within a couple of years most of the Asians in Africa will have come to this country.

Mr. Beith: Will the Minister of State confirm that the efforts of voluntary agencies to deal with the practical problems caused by this sudden arrival


deserve some credit? Will he also tell Dr. Banda that he would do well to forget any personal and petty considerations that have entered his mind and realise that, as recent British experience has shown. African Asians are in a position to contribute a great deal to his economy as those from other African countries have already demonstrated here?

Mr. Luard: I certainly agree with what the hon. Gentleman said in the first part of his question and I pay tribute to all the organisations, particularly the United Kingdom Immigration Advisory Service, for all the very valuable work that they have done in helping to look after the Asians from Africa, who have often arrived with no home and no job to go to and who, in recent weeks, have been subjected to unnecessary and unjustified attacks in the Press. I agree that Asian families have been an important part of the economy of a number of countries in Africa. Some African Governments recognise this fact and value their presence. We should welcome the contribution that they can make to our economy when they arrive.

Mr. Mellish: Is my hon. Friend aware that most of us on this side of the House would regard Dr. Banda as a racialist of the worst kind? Is he also aware that many people believe that this nation has done all that it should have done, and that its record of receiving British passport holders is one of great honour and integrity, but that they are now saying "Enough is enough"? Is the time not about due when we should have further discussions with Canada, Australia and other members of the Commonwealth, because this burden cannot go on being borne by our own people? If we do not face up to the situation now, we shall have to do so later.

Mr. Luard: It would not be appropriate for me to comment on what my right hon. Friend said about Dr. Banda. The incident involving this group of Goanese people does not appear to be part of the Malawian Government's general policy of Africanisation. It is a specific act concerned with a specific incident, the details of which we have not been able to discover.
I recognise the views of many people in all parts of the House and the country

on immigration, but we are now talking about a group whose forebears were taken to Africa from Asia at the will of the British Government. It was on these grounds that it was decided by a Conservative Administration that they should have the right to acquire British passports and the right to come here at the appropriate time. We have already taken action to phase this transition over 10 years. I do not believe that anybody in this House feels that we would be justified in preventing people with United Kingdom passports from coming here or that we should suggest that they go to Canada or any other country. It would not be appropriate to open discussions with the Canadian, Indian or any other Government about this group of people.

Mr. Shersby: Will the Government inform the Malawian Government that the British people will not tolerate the expulsion of Asian holders of United Kingdom passports for the flimsiest of reasons? Is the Minister aware that an influx of Asians on the scale which is possible by June could not be dealt with by local authorities in the areas of our major airports? I refer specifically to my own borough of Hillingdon. Will the Minister consult the Home Secretary with a view to setting up a national resettlement bureau to deal with the whole question of immigration into this country because the burden should not fall on the local authorities alone?

Mr. Luard: When I see the Malawian High Commissioner tomorrow I shall express the concern which has been expressed in the House and also the concern about the possible implications and dangers of a large-scale expulsion of people from Malawi. I appreciate the hon. Member's point about the special burden which falls on particular local authorities, but I must make it clear that we have no evidence to suggest that there is about to be a large-scale exodus of the kind he has indicated or of the kind which took place in Uganda. If such a situation did arise, we should have to consult all concerned about what arrangements should be made to receive these people.

Mr. Molloy: Is my hon. Friend aware that if he believes that it is some remarkable coincidence that a few hundred people


from Malawi, all of the same race, were accidentally put into this category by Dr. Banda and that that is not racial discrimination, there is no point in his going to see anyone? They would see him coming a mile away.
I reinforce the point made by the hon. Member for Uxbridge (Mr. Shersby)—namely, that there are sections problems for areas near the great airports. They are not new problems because of this emergency. Many people who have a right to come here, including Asians who are entitled to do so, happen to want to settle in areas near the great airports. This has created immeasurable problems for the local authorities concerned.
I emphasise the point made that we do not want simply a casual acknowledgement that something will be done. We want a firm acknowledgement that my hon. Friend and Home Office Ministers will contact the local authorities concerned so that a real contribution can be made to try to resolve what could be not merely a grievous problem but a dangerous problem.

Mr. Luard: It would be wrong to assume, merely because all the members of this group are Goanese, that these people have been expelled by Dr. Banda because they are Goanese. That is not the impression we have at present. I must make that clear.
I have already said that I understand the concern that is felt about the special burden that is placed on certain boroughs. I believe that most of the controversy which arose recently about a family which was placed in a four-star hotel should more properly have been directed at the authority concerned and at the way in which the problem was met, rather than directed as an attack on the family concerned. I shall consider whether I should have consultations with other Departments about the arrangements that should be made.

Sir Bernard Braine: Is there not another aspect of this distressing situation? Is it not extraordinary and wrong that those who are said to be United Kingdom citizens should be treated in this summary and uncivilised way by a Government who have been major recipients of British taxpayers' money over a long period? Is the hon. Gentleman aware that although everyone on

both sides of the House who has had anything to do with overseas development assistance considers its use as a political weapon to be wrong, we cannot continue lavishing British taxpayers' money on Governments who behave in this way towards those who are alleged to be United Kingdom citizens? Will the hon. Gentleman bear that in mind when he sees the Malawian High Commissioner tomorrow?

Mr. Luard: The hon. Gentleman has said that all Governments have accepted that it is wrong to use aid as a political weapon, but I agree that the Malawi Government should bear carefully in mind that they are recipients of substantial aid from this country.

Mr. Madden: Reference has been made to the publicity that was recently given to the placing of Asians in an hotel. Does my hon. Friend agree that it called into question the adequacy of the provision of housing by certain local authorities, including hostel accommodation? Does my hon. Friend agree that the recent sale by the East and West Sussex County Councils of a property in their ownership at a public auction for £55,000, which was sold a week later for £75,000 to a member of the Lewes District Council, is a matter that calls into question the whole housing policy of the authority?

Mr. Luard: Although it is not for me to comment on the policy of the authority, I agree that it seems strange that a four-star hotel should have been thought suitable for housing a homeless family of this sort. I repeat that the authorities which happen to have the two main London Airports within their territories face a special burden. We should all think about whether the burden should fall entirely on them or whether some other arrangement should be made.

Mr. Hordern: Before the Minister makes that sort of remark about the West Sussex County Council, will he do his best to inform himself of the situation facing the authority? Will he recognise that it is intolerable that a local authority should be made responsible for the actions of what is, after all, national policy? Will he recognise that there are a great many people who are highly affronted at the continued number of immigrants who


come to this country without any means of support, and who fall immediately dependent upon our social security system? What does the hon. Gentleman propose to do about it?

Mr. Luard: I have already said more than once that I understand the concern of the authorities which, almost exclusively, share this burden. None the less, I think that they should consider what are suitable premises for looking after families of this kind. As regards the last part of the hon. Gentleman's question, I understand that of the 5,000 British passport holders who came here within the past year, only 100 became dependent on public assistance. The great majority of these families have friends and relations in this country. They go to stay with those friends and relations when they first arrive, and they come here to work, not to depend on public assistance.

Mr. Maudling: I do not think that the Minister quite answered my first supplementary question. Will he give a categorical assurance that the Government will not increase the overall quota for British passport holders?

Mr. Luard: I think I have made it clear that this group will form part of the 5,000 United Kingdom passport holders. There is no intention, at present, of increasing that number. If there were to be a sudden emergency—I do not visualise anything of the sort that happened as a result of events in Uganda four years ago—obviously we should have to look at the matter again. However, at present we have no intention of increasing the quota.

Mr. John Page: Will the hon. Gentleman give instructions to the British High Commissioner in Malawi to refer all requests for entry vouchers to the Indian High Commission in Malawi, in accordance with the outline of his statement some weeks ago? It is obviously more natural and more ethnically appropriate that those who are now being expelled should go to the Goa Province of India rather than come to this country.

Mr. Luard: I have already pointed out that these people have British passports. They were given to them by a Conservative Government to enable them to come

to this country if they were turned out of the country in Africa where at present they are situated.

Mr. Luce: As regards the question of the provision of temporary accommodation, will the hon. Gentleman show a greater sense of urgency about the whole problem? Does he realise that a number of the Asian families who have recently come to this country think that we are stark staring bonkers to provide them with luxury accommodation when many people in the country are suffering real hardship and need? Will the hon. Gentleman get together with other Ministers and show a greater sense of urgency towards the whole problem?

Mr. Luard: I entirely agree that luxury hotel accommodation is totally inappropriate for a situation of this kind. I have already said that I shall consider with other Departments whether special arrangements should be made. It should be borne in mind that the number of cases of this kind is not all that great. For example, it would be no good buying up or building large premises for housing people in that situation when the total flow is, on the whole, a relatively small one.

Several Hon. Members: rose—

Mr. Speaker: I shall take another three questions before the Business Statement.

Mr. Maxwell-Hyslop: Will the Minister stop being mealy-mouthed and make a definite statement that it will be Government policy that there will be no overseas aid available for Governments who indulge in practices which would be criminal under the Race Relations Act in England? Secondly, is there any limitation on the number of people who can come in under the 5,000 passports, or am I right in thinking that there could, for instance, be a wife and five children as well, which would make 30,000 in all and not 5,000?

Mr. Luard: I shall no more make a statement of that kind than a Conservative Government would have done between 1970 and 1974, or any other Government. It has never been the policy of British Governments to declare specifically that they will not provide aid except in particular circumstances. I have already said that I think that the Government


of Malawi should bear in mind that through their policies they might make British Governments in future look more carefully at policies of this sort.

Mr. Maxwell-Hyslop: Mealy-mouthed.

Mr. Luard: I confirm that when we are talking about 5,000 vouchers we are talking about vouchers for heads of families. The number which comes in depends on the size of the family. Ordinarily it would not be as high as 30,000 but between 15,000 and 20,000.

Mr. Kimball: Is the hon. Gentleman aware that my constituency in North Lincolnshire played a large part in dealing with the tragedy of the Uganda Asians? At that time we built up a wholesome respect for the devious ability of the Asian business community, but will he assure the House that there is no question of a frame-up in this instance to achieve the same sort of queue-jumping?

Mr. Luard: I must repudiate what the hon. Gentleman said about deviousness on the part of the Asian community. Most of the people who have had anything to do with Asians from East Africa—those who have already established themselves here—have the highest respect for their industry, their thrift, and their business qualities of every kind. I have absolutely no indication that there is any attempt at queue-jumping. I should have thought that the unfortunate Goanese families themselves would hardly have deliberately chosen the very embarrassing situation in which they now find themselves. These are families who would in any case have been enabled to come here within the next year or two. All that has happened to them is that they have had to do it in the most unfavourable circumstances possible at very short notice.

Mr. Sandelson: Is my hon. Friend aware that most decent Members of the House on both sides strongly deprecate the community slander contained in the question of the hon. Member for Gains-borough (Mr. Kimball) and that it is deeply resented by all decent people in the House—[HON. MEMBERS: "Question."] That is a question. Will my hon. Friend confirm it?

Mr. Luard: I entirely agree with my hon. Friend. I think that I indicated what I thought about the insinuation contained

in the question of the hon. Member for Gainsborough (Mr. Kimball).

BUSINESS OF THE HOUSE

The Lord President of the Council and Leader of the House of Commons (Mr. Michael Foot): With permission, Mr. Speaker, I should like to make a short Business Statement.
As the House will have seen, there is a motion on the Order Paper today to allow a debate on New Zealand butter. This follows a recommendation made last week by the Select Committee on European Secondary Legislation.
The issue has been brought before the House immediately because the matter is to be discussed by the Council of Agriculture Ministers meeting today and tomorrow in Brussels, and I thought it right to make this opportunity for a debate at the earliest possible time.

Mr. Peyton: Not for the first time, I very much wish that the right hon. Gentleman was on this side of the House so that he could react to what he has just said. The Scrutiny Committee received an indication of this matter at a very late stage—on 10th May to be precise. It considered the matter on the same day, so it is in the clear.
Now the matter is brought before the House at the very last minute when the Minister is in Brussels and is unlikely to hear any reactions that there may be. The fact that the proposal appears to be acceptable and well-intentioned on the surface is neither here not there. This thing is being thrown, like other matters before it, at the House of Commons at the very last minute. A dollop of papers is slung into the Vote Office at lunchtime, and that is it.
I want to ask the right hon. Gentleman whether he is aware that the way in which we are handling this business really is unsatisfactory. Moreover, to have a debate such as we are to have on Wednesday night—a short debate late at night—is inadequate the matter will merely be swept under the carpet. It must be dealt with sensibly.

Mr. Foot: I assure the right hon. Gentleman and the House that I am not in favour of sweeping this matter under the carpet in any sense. That is why I


made provision, after the previous debate that we had on skimmed milk, for a further debate on the procedure question, and a further debate will take place on these matters very soon afterwards. I am therefore fully in favour of the House seeking to get a solution to the problem.
However, I am not the creator of the problem. The problem arises from the fact that decisions are being taken under the European Communities legislation which are not in accord with the arrangements of this House. The Scrutiny Committee does its best to assist. I am not making any criticism of that Committee.
The decision that the Government and I had to take was whether we were to provide time for this matter to be debated, despite the short time. I believe that the proper course was for us to provide the time for debate and for me to come to the House and tell the House what the situation has been.

Mr. Powell: Without imputing to the right hon. Gentleman, of all people, the slightest responsibility for the difficulty of principle that we are in, surely the proposition which must be accepted is that the House should have the opportunity not merely of debating but of coming to a decision upon these matters. Therefore, why are we to debate the matter on the motion for the Adjournment?

Mr. Foot: I fully accept what the right hon. Gentleman says about the extreme inconvenience for the House in all these procedures. However, I believe that the only way by which we could have had the debate immediately was by arranging the debate on the Adjournment, as I have done. That debate will enable the House to express its view on the matter. Any view that the House expresses on the matter will be conveyed to my right hon. Friend who is negotiating in Brussels.
Once again, I am fully in agreement that this is not a satisfactory way of dealing with these matters. We are seeking to discover how we can get a better method of dealing with these matters. All I am saying is that the most honest course for me, when confronted with this problem on Thursday afternoon, was to arrange a debate as speedily as possible. Had I done anything else, I think that the reprimand which would have been

delivered in this House would have been justified.

Mr. Jay: Is my right hon. Friend aware that the right hon. Member for Yeovil (Mr. Peyton) might more appropriately have said some of these things when we were debating the European Communities Bill three years ago? Is he also aware that what the Government should have done in these circumstances was to inform the authorities in Brussels that the British Minister representing this country was not prepared to discuss this issue until the House of Commons had had time to debate it?

Mr. Foot: I fully appreciate the sentiment behind what my right hon. Friend says. However, one of the difficulties is that, had the Government taken that course, we might have put in jeopardy an agreement affecting New Zealand which the British Government and the New Zealand Government believe will be highly advantageous to New Zealand.
I fully agree with what my right hon. Friend said, that the way in which we deal with these matters is extremely unsatisfactory. We are trying to discover methods of improving it. Some suggestions to that end have been made by the Scrutiny Committee, although I fully acknowledge in advance that I do not think that those proposals go sufficiently far yet to deal with this problem. All I am saying about this matter is that I believe that we behaved as fairly as we could to the House in the extremely urgent circumstances. An opportunity is being provided to the House to express its view, despite the very short time available.

Mr. Marten: As a member of the Scrutiny Committee, and as my right hon. Friend the Member for Knutsford (Mr. Davies) is not present in the Chamber at the moment, may I support what was said by my right hon. Friend the Member for Yeovil (Mr. Peyton)? This is a highly political matter stemming from Protocol 18 to the Treaty of Accession. The right hon. Gentleman says that it will be highly advantageous to debate the matter. I am not so sure that it will, because in the draft regulation which is before the House all the quantities are left blank, so we do not know before we start the debate what we are talking about. We have had no time to


seek the views of the New Zealand authorities or the trade or anybody else about it. This is very unfair. It is the quota which is the crux of the whole matter.
I believe that this is a classic case in which a deal might be done over in Brussels tonight or tomorrow without the House of Commons being able to debate the details of that deal. I therefore propose that the Leader of the House should have another think about this and should let the Minister go ahead and negotiate in Brussels and get a figure. Then, when the Minister in Brussels has got a figure, without actually finally agreeing it by signing a regulation which would become the law, he should come back to the House with that figure and the House of Commons should debate it, so that the House may express an opinion upon it.

Mr. Foot: Thanks to the arrangement that the Government have made for dealing with this matter, the hon. Gentleman and others who hold that view will be able to express it in the debate. That is why we have provided time for the debate, so that such views can be expressed.
I repeat that I do not believe that this is a satisfactory way of dealing with matters as important as this and that we must find a better solution. All I am saying is that so far neither the Scrutiny Committee—I emphasise that I am not criticising that Committee—nor my hon. Friends, or even the hon. Gentleman, have come forward with a fully satisfactory way of dealing with it. What I am suggesting here and now is that the House will have an opportunity of discussing this matter, thanks to the arrangement we have made. I think that it was absolutely imperative that we should have provided such an opportunity.

Mr. Roper: I congratulate my hon. Friend on having found time for this debate. May I say as a member of the Scrutiny Committee that it was our wish that a debate should be held before the discussion takes place tomorrow in Brussels? Will my right hon. Friend tell the House whether it is not also the view of the New Zealand Government that a decision should be reached as soon as possible? Will he ensure that in future when he puts down subjects like this for

debate he gives on the Order Paper the references of the Community documents concerned?

Mr. Foot: The relevant sections of the latest report of the Scrutiny Committee and the related documents are in the Vote Office. I take note of what my hon. Friend said about the need for further details.
As for the views of the New Zealand Government on this matter, they are as I think he has described them, but that is a matter that can arise in the debate this evening. It may be that the debate tonight will be at a late hour, but it is better to have the debate then than to have no debate at all. After whatever may happen in Brussels, it will be open to the House to decide whether to return to the matter afresh. I am in full agreement that we must discover some better way to deal with this whole problem, which was not created by this Government, and least of all by myself.

Mr. Rippon: Will the right hon. Gentleman make provision for a longer debate on Wednesday? Does he agree that the subject matter is of such importance that it cannot be dealt with in an hour and a half? If he arranges a longer debate, that might meet the wishes of the House.

Mr. Foot: I am prepared to see whether we can extend the hour and a half on Wednesday, but I have said to the House before that I have never thought that the procedure debate of the kind that we are to have on Wednesday can deal exhaustively with this subject, and we shall have to return to it at a fairly early stage in the House. I promised a special debate resulting from our difficulties over a previous Order, and the debate on Wednesday is, in particular, in execution of that promise.

Mrs. Dunwoody: Is my right hon. Friend aware that I am grateful to him for showing this degree of flexibility? When he is looking at these arrangements, will he spare a thought for us poor benighted members of the Agriculture Committee who have a vested interest in this? Whisper it not, but had it not been for the fact that I am mildly playing truant from Brussels I should not have been here and would not have been aware


of the change in the business of the House.

Mr. Foot: I am aware of that. That is one of the difficulties of having debates called at short notice, but there was no other way out of this difficulty. For other occasions, we must try to learn from what has happened this time.

Orders of the Day — FINANCE BILL

(Clauses 14, 21, 24, 26, 27, 48, 52 and 64: new clauses relating to capital gains tax)

Considered in Committee [Progress 13th May]

[Mr. OSCAR MURTON in the Chair]

Clause 48

INVESTIGATORY POWERS

4.28 p.m.

Mr. John Cope (Gloucestershire, South): I have an amendment on the Order Paper, No. 94, in page 31, line 44, leave out '20A and 20B' and insert 'and 20A'.
I am persuaded that licensing of housebreaking by the Inland Revenue might more conveniently be discussed with other matters when we debate the Question, That the clause stand part of the Bill, and I shall therefore not move the amendment.

Question proposed, That the clause stand part of the Bill.

Sir Geoffrey Howe (Surrey, East): As the Committee will have seen, the Opposition have tabled a number of amendments, including that to which my hon. Friend the Member for Gloucestershire, South (Mr. Cope) has just spoken so briefly and so lucidly, to this important clause. It turns out that a number of the clauses cannot be discussed in the House at this stage of the proceedings but all the points covered by the amendments standing on the Notice Paper in the names of my right hon. and hon. Friends and myself can be taken when the schedule is discussed in Standing Committee upstairs.
I wish to make the position clear. At this stage we are discussing Clause 48 as a whole, and we seek to defeat the clause as a whole. If, by some mischance the Committee takes the opposite view of the detailed provisions contained in the schedule, these will be subjected to close scrutiny and examination in

Standing Committee upstairs. Each of the amendments on the Order Paper—for example, the one that provides that the right of search shall arise only on the authority of a High Court judge or of two special commissioners—will be considered in detail in Standing Committee upstairs. But all these would-be amendments of the main provisions are no more than a palliative. They can and will be pressed at that stage, but it is our hope that that situation will never arise.
Having considered these provisions in considerable detail, I wish to make it crystal clear that we on the Opposition side of the House are clearly opposed to them in their entirety. We shall oppose them root and branch and we shall invite the Committee to reject them outright tonight. If the clause does stand part of the Bill and is not rejected, the proposals contained in the schedule will be ruthlessly scrutinised, examined and challenged in Standing Committee, word by word and line by line.
We are not seeking, as the Chief Secretary will no doubt suggest, to defend or advance tax evasion. We do not challenge the principle that it is necessary for tax collectors to have reasonable powers as far as can be justified to prevent evasion. But that interest must always be balanced against the need to avoid any undue interference with the taxpayers and citizens of this country. The proposals in this clause do violate the rights of citizens to personal freedom and privacy—the right to privacy in their own homes, the right to call their homes their own. These provisions propose to invade these rights to an intolerable extent, and cannot be justified.
I draw the Committee's attention to the fact that the Chancellor of the Exchequer is unable to be here to conduct this debate because he had to attend a meeting of European Finance Ministers in Brussels. That may be inescapable, but it is much to be regretted. I would point out, however, that on the day that we are examining very important matters dealing with the liberty of the subject there are, on the Government Benches, only the hapless Chief Secretary to the Treasury and the Government Whip. The Chief Secretary is not supported by the presence of one of the Law Officers. We want to know how far


these important provisions have been considered by the Attorney-General and the Solicitor-General. Surely this House is entitled to look to the Law Officers of the Crown to give their views about these proposals, and to justify them if they can.

Sir John Hall (Wycombe): Has my right hon. and learned Friend noted that not only is the Chief Secretary not supported by the chief Law Officer; he is not supported by any hon. Member of the Labour Party. It would seem that hon. Members opposite show no interest in this subject.

Sir G. Howe: My hon. Friend is right. I also point out that the Chief Secretary is not even supported by one of his ministerial colleagues. I make a serious point about our right to require the presence of the Law Officers on this issue. One of the prime functions of the Law Officers is to advise the House on issues involving the liberty of the subject. This is just such an issue.
The Chancellor's absence is regrettable, because he has accused the Conservative Party of hypocrisy in challenging these provisions. That strikes us as a characteristically disreputable charge, because concern about these matters is not confined to the Conservative Party, as is evidenced by the attendance of hon. Members of other parties for this debate. But far outside this House and the confines of Parliament there is—the Chief Secretary must acknowledge it, instead of smirking gently as he contemplates the speech that he is about to make—widespread and deep anxiety about these proposals. It has been expressed in the columns of the Press and in the professional Press. The accountancy profession and the legal profession are both gravely disturbed.
If the Chief Secretary ever dares to venture to his constituency, having brought forward this proposal, he will find that millions of ordinary, law-abiding citizens are rightly and gravely concerned about the proposals. It comes very ill from the mouth of the Chancellor to advance the charge of hypocrisy when one considers his own reaction to the similar powers given in relation to VAT in the 1972 Finance Bill. Speaking

in the Standing Committee on the Bill on 12th June 1972, he said:
No Government in their right senses, and certainly no Government with a sense of Britain's legal traditions would ever have considered the introduction of powers of this nature had they not been frightened of large-scale evasion in the absence of these powers." —[Official Report, Standing Committee E;12th June 1972, c. 806.]
He went on to talk about "a snooper's charter", "a vast extension of the powers of Custom and Excise" "frightening powers", and "un-English powers", of which the Government should be heartily ashamed. As so often, even today when he dons the mantle of ministerial office, there is no limit to the extravagance of the Chancellor's language.
As it has turned out, some concern about those powers in relation to VAT was well justified, even at that stage. In fact, it is the use of the VAT powers which is very closely related to the strength and depth of anxiety and concern about the matters that we are discussing today. We made plain in 1972 that we would be ready to review the form of operation of the VAT powers if there were any sign of abuse of them. The time for review has come. Certainly, the VAT powers should be re-examined. Many people feel that they should be withdrawn altogether. I do not go that far, but I have no doubt they do need to be closely examined and accompanied by stronger safeguards.
There is a profoundly unattractive feature about the way in which the Chancellor has sought to introduce these measures. He did so without expressing or implying any reference to the VAT powers and the way he felt about them in the past. He blandly presented these proposals as if they were in no way a matter for argument or anxiety, and he did so without any sense of shame. He should have referred to his anxieties of 1972, explained why they had all melted away, and told us how he could justify not only the maintenance of the VAT powers but the extensions that he is proposing today.
Why is there anxiety about the VAT powers? Perhaps it is because these powers have been used much more frequently than was originally visualised. They have been used on many occasions in private homes instead of trade


premises. Questions asked by some of my hon. Friends show that VAT powers have been used on many occasions in trade premises, but an answer given by the Financial Secretary on 10th May this year showed that private accommodation has been searched and investigated under the VAT powers on no fewer than 143 occasions. That is disturbing many people a great deal. The exercise of the powers of search—the Chief Secretary ignores this at his peril—is being undertaken in a way that is causing growing alarm and resentment among many people. The answers given to questions on 4th May and 10th May this year referred to two particular occasions, —the searching of the Black Cap public house in Camden Town, and the searching of the premises of a Mr. George Button in Dartford, to whom an apology was extended today.
The things which strike one about the powers of search are very serious. For example, when the Black Cap was searched the premises were visited and searched effectively by no fewer than seven officers of the Customs and Excise Department. The prospect, to a law-abiding trader against whom a suspicion may arise, of being faced with a posse of that kind is bound to cause real alarm.
Just as it is causing alarm to traders, so one should consider how it might be exercised under the new provisions. What is more, the seven officers concerned with the Black Cap case, according to the parliamentary Answer, proceeded so that diaries, handbags and items of a personal nature were examined, but only superficially. If these searches are to proceed into private homes, into diaries and handbags and other items of a personal nature, there is real cause for concern.
The facts were set out on 10th May concerning the visit to Mr. Button's home in Dartford. Seven Customs and Excise officers and two police officers arrived at Mr. Button's home and, according to the Daily Mail report, stayed there for eight hours. According to the parliamentary Answer they
sought documentation relating to the business in cupboards, drawers and handbags. In addition, one car was searched".—[Official Report, 10th May 1976; Vol. 911, c. 49.]
Again, according to Press reports, a child's school satchel was searched as the child was on her way to school. At the end no evidence of VAT fraud was

found and an apology has been extended to Mr. Button. He was an entirely innocent person. That shows why we are so anxious about the extension of these powers.
It is all very well for the Chancellor and Ministers to say that the powers will be used only in a handful of cases affecting suspected fraudulent people, but they can be used on the basis of suspicion of guilt. How many more wholly innocent people, therefore, will be afflicted in this kind of way under the VAT powers and how many more under the new powers?
According to an Answer given a few days ago, the VAT powers have given rise to no fewer than 150 complaints. The existence of 150 complaints about a power of this kind certainly suggests that it is not being used in a fashion which comforts or consoles, let alone exhilarates the citizen upon whom these powers are visited.
What is more disturbing is that according to an Answer given to my hon. Friend the Member for Macclesfield (Mr. Winterton) on 5th May there is certainly very little evidence in these 150 cases to suggest that the complaints are being taken seriously. We are told that on investigation only five have been shown to have some substance. Information has been of such a serious nature as to require no more than an oral admonition. But if the powers are being exercised so as to give rise to 150 complaints, and if the investigation into them leads to the conclusion that only five are of some substance and that none of them deserves more than an oral admonition, there is every cause to be gravely disturbed about that.
We would like to know from the Chief Secretary what are the standards of propriety being applied in such cases. Is it purely a matter of routine inquiry that seven people should descend upon a home and apparently search their way through it, dominating the premises for eight hours? Is it a matter of proper routine that these people are able to examine diaries, handbags and other items of a personal nature? Is it appropriate for a child's school satchel to be searched as a matter of routine in cases of this kind? Are these all routine matters, or were they matters which gave rise to some modest concern in the Customs and


Excise? Were they matters in which there was any oral admonition?
It has been stated by one person quoted in the Press for the Customs and Excise that all that happened at Mr. Button's home was no more than routine investigation. We should like to know whether that is a proposition by which the Chief Secretary stands. Are the matters relating to Mr. Button's home no more than a routine investigation and a yardstick by which we are to judge the new powers if they pass through this House? Is every citizen to be required to use the euphemism of "helping the Revenue in its inquiries" by submitting himself to this kind of treatment?
4.45 p.m.
Our anxiety is deepened when we find that the powers now suggested are not to be restricted but extended massively. The VAT powers apply to about 2 million registered VAT traders. The new powers are proposed to apply to about seven or eight times as many ordinary income tax payers, and it is nonsense for the Chief Secretary or any Minister to suggest that in some way these powers will not affect ordinary PAYE taxpayers. Such people are certainly not outside their scope. The clause applies them directly to each and every PAYE taxpayer, and it is no answer to say that it is not the ordinary taxpayer who will be affected. Is it suggested that the 2 million self-employed people already liable to VAT are fair game for this treatment? Certainly we believe that they are not. The National Federation for the Self-Employed and other organisations have made clear their view of what is proposed.
Anyway, who is the ordinary PAYE taxpayer? Taxes are now so high and widely resented that more and more people are taking more than one job, from weekend house repairers to boys who deliver papers or clean cars. Taxes are already felt to be so oppressive that, as the hon. Member for Tottenham (Mr. Atkinson) pointed out on Second Reading, we are well on the way to becoming a nation of moonlighters. Large numbers of people who do a PAYE job in one part of the week may find themselves in the position of supplementing their income in all sorts of ways at odd times.
It is idle to pretend that there is not also great fear on this matter because of anxiety about how the powers can be used in relation to capital transfer tax. The CTT reaches low down the income scale; and there are wide grounds upon which anxiety could arise there. There is also deep anxiety at these powers being used in connection with any future wealth tax.
Moreover, to apply these powers to income tax is to apply Customs and Excise powers in a quite different and new area. They may have been appropriate on indirect taxes of a kind normally and traditionally handled by the Customs and Excise. The Excise men have for long had to deal with smugglers and rum runners with the advantage of powers of this kind. But until now it was never thought appropriate to attach them to taxes on income of the sort we have had for about a century and a half and which have not required such powers hitherto.
The powers in the Bill are far more extensive than the VAT powers, but they have much less definition for that. They go far beyond the recommendations of the 1955 Royal Commission and we have managed to do without them for more than 20 years.
The proposed Section 20 in Schedule 6 contains the power to call for documents of taxpayers and others, and these arise simply for the purpose of inquiring into the tax liability of any person. No more than that is necessary. They arise in relation to any tax and can extend to whatever documents may seem relevant in the opinion of the inspector. They relate to any tax to which a taxpayer is or may have been subject, to whatever liability, however large or small. The powers to require the production of documents extend to the taxpayer's spouse, even if there is no evidence that she has been involved in her husband's business or has knowledge of his records.
The powers extend to any son or daughter of the taxpayer, apparently of whatever age and wherever that child is to be found, however long ago the child might have last had contact with its parents. They will be used in relation to an infant child, on the one hand, or, on the other hand, a 50-year-old child of a recently deceased business man who may not have seen its father for many years.


It is absurd and intolerable for the powers to range as widely as that.
They relate to taxpayers of whatever Infirmity or age, irrespective of the scale of fraud, suspected or not. They relate to tax liability in the past, however far back. They relate to the affairs of the taxpayer who has died, however long ago he may have died. They relate to the affairs of someone working as the director of a business long since extinct, however long ago that may have happened. The very breadth of these powers is a terrifying insight into the way in which they may be used by people who designed them on this kind of scale.
A further example, which causes concern, relates to the powers to call for the papers of a tax accountant set out in new Section 20A of Schedule 6. Apparently these are to extend to all the clients of a tax accountant. Under new Section 20A(2) there is no necessity even to name the client of the accountant against whom the powers are being exercised
New Section 20B contains the power of entry to obtain documents, if necessary by force, and at any time. One feels that this could affect many innocent people. Many people could be suspected—not just anyone who might ultimately be found guilty—and anything may be removed. No conditions have to be satisfied before the warrant can be issued, no list or receipt has to be left for the documents or other things which are taken away. It would be an advantage if these powers could be exercised only on the authority of a High Court judge or two special commissioners but, I suggest, they are powers which ought not to be placed in the hands of any one authority. They go far beyond the balance which is right for protecting the taxpayer and the rights of the ordinary taxpayer to privacy. To fortify one's anxiety, the powers of entry are to extend, as my right hon. Friend the Member for Crosby (Mr. Page) ascertained long ago, even to the premises of a legal adviser or accountant. There is no protection whatsoever in these circumstances.
Only the most thrusting and oppressive group of people would ever have asked for powers as wide as these. If those people are insensitive to the reaction to these powers, then one must surely

tremble at the way in which those powers might in the end be used.
It is said, in defence, that other countries have powers of this kind. That is not a very attractive defence from the Labour Party, who spent many months of many sessions in the last Parliament criticising the then Government for introducing "alien laws" into this country, whether in the European Communities Act or the Industrial Relations Bill. It ill becomes the Labour Party to argue on that basis in this case.
In the United States the system is entirely different. Self-assessment with spot checks is a quite different approach. The powers enjoyed there by the Inland Revenue Service are very sparingly used in a quite different tax environment, where top tax rates are far lower than they are here. The tax system as a whole is widely seen to be fair.
To add these powers to the tax system designed by the present Government in this country is quite intolerable. They would destroy altogether the relationship of confidence which should exist between the tax collector and the taxpayer. That is the context in which they have to be seen. More and more people in this country think they are living in a society in which their freedom and liberties are being chipped away—one more regulation, followed by one more right of inspection, followed by one more right of entry.
Yet they are not to be justified to this Committee. That is astonishing and intolerable. If anyone had told me that provisions like this would be introduced when the Government Benches were empty and without the advice of the Law Officers, I should not have believed it. I hope that the Whip will indicate our urgent anxiety for the attendance of at least one Law Officer. People regard this not as an isolated issue but as one more bar in the great ring fence which is curtailing their freedom. It is not just an idle comparison to consider the plight in Sweden of such a distinguished citizen as Ingmar Bergman because people here regard that kind of story as the hallmark of a society which is so over-governed that it is, in a real sense, oppressed by over-government.
This clause is one more addition to the armoury that this Government have introduced as part of the stock-in-trade of


Socialism. One wonders why on earth it is in the Bill at all. We know that Mr. Plant of the Inland Revenue Staffs Federation has boasted that it is in the Bill because that trade union pressed for its inclusion. This is one more disturbing example of the way in which authority is passing away from this House, even from the Government, and into the hands of people further away. That is the significance of the eerie feeling many hon. Members must have had as they heard the Chancellor justifying this provision in the very words of Mr. Plant two days before in The Sunday Times. How does this come about? Did the Chancellor write Mr. Plant's article or did Mr. Plant write the Chancellor's speech? The latter is more probable. Perhaps the Prime Minister wrote both of them. Most probably, the same member of the staff federation, in a key position, composed them both. How else are we to explain the Chancellor's change of tune?
Where is the valiant champion of freedom who trumpeted his way through the Standing Committee on the 1972 Finance Bill? How has he been overcome to bring this provision before us? He must face the fact that nothing has done more than this particular instance to arouse anxiety. We ask, who is in charge of this part of the Bill? Who is calling the tune? Whatever the answer may be—we hope to hear the Attorney-General amplify this as well as the Chief Secretary—we do not like this provision and we shall do our level best to change it. It is deeply repugnant to the Committee and I hope that it will be rejected.

Mr. David Mitchell (Basingstoke): We all learned at school that the price of liberty is eternal vigilance. The heart of liberty is encapsulated in the phrase "the Englishman's home is his castle". It was perhaps the only place where with all his idiosyncracies and personal oddities a man, or woman, could shut the door and enjoy complete privacy. At least they could until 1976.
One has to ask, what has changed? The Inland Revenue has powers, and has always had powers, against fraud, such as the power to put an artificially high assessment on the citizen and leave the citizen to produce the papers to prove that that assessment was wrong. What has

changed? Is it a Government who themselves feel that their taxation is so excessive that the ordinary citizen will be driven to fiddle? Or is it a Government who, on assessing the balance of factors, regard the liberty of the citizen as a lesser matter than did any other Government in this century? What is it which has changed in 1976 over all the years of the past? Is it that this Government have now reached a situation in which they are proposing powers which will introduce "the knock in the night"? If that phrase may sound exaggerated, I shall return to it later to prove my point.
It is good to see that some hon. Members have joined the Government Benches, even if I recognise some of them as members of the next Government rather than the present Government.

Mr. Cranley Onslow (Woking): I have not come to the Government side of the House in order to advance my own claims to be called next after my hon. Friend although, if the Chair is to adhere to the practice of calling hon. Members from both sides of the House, alternately, this would seem to be a consequence. I have come here simply to demonstrate a shameful situation and to give all the support possible to the proposition that this House is a Chamber of which both sides should be occupied.

5.0 p.m.

Mr. Mitchell: I asked what safeguards were built into the clause. The Revenue does not even have to be sure that an offence has been committed. The Bill refers to "reasonable grounds to suspect". The Revenue does not even have to be sure that an offence is committed before the powers can be used. What an extraordinary situation. The citizen does not have to be there when this invasion of his home and privacy takes place; no such protection or safeguard is afforded in the Bill. Indeed, he could be on holiday and could come home to find that his house had been forcibly entered and broken into by the Inland Revenue. He does not even have to be asked to be there when he can reasonably be expected to be at home. Nor does he have to be formally notified that he will be visited in this way. This is literally the introduction of the knock in the night—1984 in 1976.
Do the police have to be present when this break-in by force takes place, as the


Bill describes it, to see that nothing else is taken and that the citizen's property is properly locked up after the forcible entry? I find no such safeguard in the Bill. What price an Englishman's castle and his privacy?
The Revenue does not even have to show that a large sum is involved. Could it be a matter of £5, or a piece of cheese or a pineapple? An offence may be committed by a greengrocer who takes home a pineapple which will not keep until Monday, eats it and does not declare it as a personal benefit from his business. The restaurateur or cafe proprietor who takes home some cheese which will be stale by Monday and eats it before it goes bad may be committing an offence. There is no indication in the Bill that he will not be harried like this. Safeguards for the citizen just do not exist.
I draw attention particularly to Amendment No. 75. I hope that the Government will accept that if this miserable clause gets to the statute book it should provide that any documents taken should be entirely relevant to the case, that they shall be copied and returned, so that the citizen may know what documents have been taken and may have them hack if he needs them for the working of his business. They should be listed before they are removed and he should be given the list of the documents removed. Without those simple safeguards, the citizen is even more at risk than one might at first have considered.
We should oppose these powers because they will sour the relations between the Inland Revenue and the ordinary taxpayer. His co-operation and sense of fair play is a necessary requirement for the proper operation of our tax system. If the Revenue intends to set itself up as the enemy of the people, it will be regarded in that light by the people and will therefore lose much of the co-operation that it could and should have expected.
These powers will inevitably lead to a growing dictatorial attitude among those who have them. Power corrupts. In a letter that I received only this week, a gentleman writes:
In the light of past experience … I feel that it is virtually certain that the new powers would be used less to attack fraud than—in actuality or as an overhanging threat—to establish a domineering position vis-à-vis

honest taxpayers in what ought to be, but often are not, fair negotiations.
He goes on to say that, before an appeal begins under the existing arrangements, the Treasury and the Inland Revenue
… indoctrinate the Commissioners with their account of the nature of the dispute, including—so they say—the grounds on which a taxpayer complains. They refuse, however, to inform the taxpayer of what they have said even on his behalf'.
If one writes to ask for an adjournment of a case or something like that, one gets a reply not from the Commissioners but from the inspector of taxes concerned. That is like having a reply from the police when one writes to the magistrates' clerk when a case goes to court.
These powers are abhorrent to the people of this country and I hope that the Committee will throw them out.

Mr. J. Enoch Powell (Down, South): It is not without symbolic propriety that, during the whole of the speech of the right hon. and learned Member for Surrey, East (Sir G. Howe), the arrangements of this Chamber appeared to have been entirely altered, so that it was converted from a chamber of two-sided debate into an arrangement for placing in the dock the solitary figure or figures of the Chief Secretary and the Financial Secretary—accompanied distantly by what appeared to be the shadowy figure of a warder, in the form of the Government Whip. Only at a late stage did certain hon. Members bethink themselves of the best tradition of friends of the accused and do something to break up this symbolic arrangement.
But true it was, for this afternoon the Government. in the persons of the Treasury Ministers, are in the dock. They stand accused of an unjustified invasion on a major scale of the liberties and privacy of the citizens of this country. It is an invasion which is the more shocking for the virtual absence of any attempt to justify it.
On the Second Reading, the Financial Secretary urged two grounds, neither of them in itself at all a justification for seeking these powers. The first was that they would be used very sparingly. It will be the rarest occurrence. In only "a handful of cases "—that was the phrase—would the powers in Schedule 6 be thought necessary to be applied.
If the Government can be so sure that It will only rarely arise that these powers are necessary, they must surely be able to define, in a way that they have not even attempted to do hitherto, what those rare circumstances are. Let them come forward and tell the Committee that it can happen thus, thus and thus, that an evasion of tax can be dealt with only and quite exceptionally by the power forcibly to enter private premises. But no such attempt has been made. We have simply been assured, "Give us the powers in the Bill and it is our opinion that only in a handful of cases will they be used." The Financial Secretary, perhaps appropriately, appears to have very big hands.
The right hon. and learned Member for Surrey, East pointed out that, when powers similar to these have hitherto been restricted to VAT, they have been used in about 40 or 50 cases a year. What possible ground has the Financial Secretary for supposing that, if those powers are extended to cover the whole field of tax, there will not be hundreds of cases in a single year? If he has grounds, contrary to the evidence of experience in the last three years, for saying that only in five, 10 or a dozen cases per annum will these powers be necessary, then he is duty bound to show precisely what are those exceptional obstacles to the operations of the tax authorities which can be surmounted only by the powers which are being sought in this clause and the attached schedule.
The other ground which was given by the Financial Secretary was even more shocking and ought particularly to put the Committee on its guard. He said, "There is no reason for anxiety, for the honest taxpayer has nothing to be afraid of." "Give us these powers, agree to destroy in yet another sector the rights and privacy of the private citizen, and you need not worry about it, "says he to the House, "because if you are honest it will not affect you."
There is no invasion, no intolerable advance of tyranny which not merely could not but has not been justified by precisely that argument. I recall how in the 1930s, when there began to filter through to the populations of countries which had fallen under absolutist régimes the rumour of what was being done to

their fellow citizens, they were told "You need not worry, it is only the enemies of the State who are being deprived of their natural rights in this way. As long as you are a good citizen you have nothing to fear. It is only to the bad citizens that this is applied."
When we are considering the destruction of the liberties and the privacy of the citizen, we are not justified in setting out to divide the public in advance into two sections, the honest and the dishonest, and saying that these provisions apply only to the dishonest and it does not matter, therefore, to what sort of oppression they are subjected. Always it has been the argument of those who sought to defend the indefensible—whether it was an existing institution which needed to be reformed or a new advance of oppression—that there is nothing to worry about: "If you are innocent, it will not happen to you." I wonder.
It so happens that just at the time when this provision was in agitation I was reading the account of the debates in 1879 upon the abolition of flogging in the Army. I noted particularly apropos the speech made by the Financial SecretarY—I hope that he will like the company in which he finds himself—that those who defended the maintenance of that barbarous custom did so on exactly the ground on which he sought to defend the introduction of these provisions. Sir Henry Havelock, no doubt a very gallant gentleman, defended the status quo in this way.
… he wished to say that no class of men would rejoice more than the officers of the Army when this punishment could be done away with but until this occurred the good soldiers knew that they were in perfect security, because there was not the slightest risk that, by any possibility, corporal punishment would be inflicted upon them.
That is one of the doors through which tyranny enters and liberty disappears. It is said that we are bringing in this measure to deal with wrongdoers, that no one would wish to put himself in the category of tax evaders, and let no one, therefore, stand up to protest against provisions which are designed to deal with tax evasion. The very fact that it is that kind of argument and not the sort of argument which we ought to expect from those who are charged with defending and justifying the operations of the Inland Revenue and Customs and Excise, the very fact that


we have heard from the right hon. Gentleman the kind of retrograde argument that has been advanced in favour of the clause leads us to greet it not with suspicion but with hostility.
There is only one condition on which Treasury Ministers can excuse themselves for having brought forward a Bill which contains the clause, and that is if they are able to demonstrate to the Committee the precise circumstances in which there could be no alternative to the invasion of privacy and personal rights which the clause imports. More than that, they must also prove that those circumstances are of so exceptional a character as to justify the ground which was alleged in favour of the clause though that will by no means necessarily justify the Committee in adding the clause to the Bill.

5.15 p.m.

Mr. Cope: I wish to make clear my repugnance for the clause. That phrase is not mine but the Chancellor of the Exchequer's. He used it in opposing, in the debate on the 1972 Finance Bill, the clause bringing in the VAT provisions. He persuaded the present Chief Secretary and the present Financial Secretary to vote against the clause. Today those Ministers are trying to extend the provisions to many more people. We must be absolutely clear how far the powers go. They go much further than the Chief Secretary sometimes implies.
An inspector will have power to break unto any premises, by night or day, regardless of whether they are occupied, to search premises and to remove any document he wishes from those premises. "Premises" includes any place of business or home, and the offices of a lawyer or accountant.
There is no point in writing professional privilege into the Bill by Section 20A in Schedule 6 if that provision is immediately annulled by Section 20B. If a barrister or solicitor refuses to produce a piece of paper under the professional privilege rules and the Inland Revenue still wants it, it will only have to wait until he goes home to break into his premises and take it away. Other offices, however loosely connected to the taxpayer, or even unconnected, are included. The person whose office or home it is may not be the person who is thought to have committed the tax fraud. Even if

he is. power is given to break into psychiatrists' offices, for example. As we have seen in America, that can lead to considerable trouble for political parties and their leaders.
We have not been told why these powers are required. A Back Bencher claimed on Thursday last at Question Time—and the Treasury Bench agreed—that there was massive evasion of the tax laws the extent of which could not be evaluated. We have been given no evidence to support that allegation and we have not been told why the clause and the provisions in Schedule 6 will help the Inland Revenue.
They will not help the Inland Revenue when dealing with ordinary taxpayers because, as my hon. Friend the Member for Basingstoke (Mr. Mitchell) said, if the Inland Revenue suspects fraud or the withholding of information, it issues an enormous assessment and makes the taxpayer justify his figure. The provisions will not be of much help to the Inland Revenue in dealing with major frauds because they come within the province of the police who already have rights of entry, with safeguards. The Chief Secretary has a duty to tell us why he is not satisfied with the existing powers of entry possessed by the police. The conclusion I draw is that the powers will be used only for small suspected frauds in which the police are not involved.
Several improvements and safeguards are suggested in amendments both in Committee of the whole House and Upstairs. I favour the idea floated in the Economist, which is supported in an amendment, that if these powers are to be taken by the Government, the personal signature of a Minister should be required by the information of the court. The Government have not yet justified the principle which lies behind these provisions.
There are also several other lesser points with which I hope the Chief Secretary will deal. One point concerns damage and the duty of care that any citizen owes to other citizens. What happens, for example, if the Revenue officer after ransacking somebody's bedroom slips on the carpet, falls downstairs and hurts himself? Who is responsible for paying damages in that case? It was surprising to me to discover not


long ago that the householder, owner or occupier of premises has a duty of care towards trespassers if he has been careless in allowing them to trespass. Does he have a similar duty of care to the house-breaker who turns out to be a licensed Revenue official?
What will happen if the official leaves his jemmy on the landing and the householder falls down the stairs? In that case does the Revenue have to pay damages to the householder? What happens if after the Revenue man has broken down the door and taken whatever he requires and gone away, a burglar then appears on the scene and takes advantage of the state of the premises to carry out the burglary himself? Who pays for the damage caused?
Supposing also that the taxpayer is present when the Inland Revenue official enters the premises and takes it on himself to hold on to a file or papers, and says to the tax inspector" You may search the premises, but you will not have this file. "Is the Revenue official then allowed to use reasonable force, any force, or no force at all, to get the file, if that is what he then wants?
What form of identity card or documents is it proposed that the Revenue official should carry in the course of going about this part of his work? We all know that other powers exist in respect of gas meter readers and similar workers. We also know that many householders have admitted what they thought to be a gas meter reader or other genuine official only to discover that he is a burglar who has then proceeded to steal. Obviously anybody may use the disguise of a Revenue official unless it is made clear to the public by some form of identity that he has come to carry out a search.
It seems to me that these are not mere details but are important aspects of a provision on which the House needs to be reassured. The most important part of this discussion is that the Chief Secretary must justify, if he can, the need for these provisions at all.

Mr. Onslow: I am glad to see that others have now taken the seats on the Labour Benches which some of my hon. Friends and I occupied a little earlier. No doubt it came to the attention of the

Labour Members that their Benches were empty when we were discussing this important clause. It is striking that so few Labour Members appear to be interested in this subject.
My remarks could have been made by an hon. Member on either side of the House because I wish to read to the House extracts from a letter from a constituent who comments on the subject of snoopers and makes a specific reference to his own experience with VAT officials. His comments will no doubt have relevance to the situation if the clause is included in the Bill. I wish to emphasise that any one of us may have received a similar letter from a constituent. Therefore, I believe it is useful that I should quote from the letter, because nothing is better for Ministers than that they should know what people think about them—not from the point of view of politically-motivated opponents, but in the eyes of somebody who is affected by legislation and the treatment to which he is subjected by Ministers and officials. My constituent does not think much of that treatment and that is why I am quoting his letter.
My constituent refers to a letter from a Treasury Minister which I forwarded to him. He comments:
I am surprised that he bothers to reply in English. The letter could be sanskrit for all the sense it makes to me. The Minister goes to great length to show why it is necessary for Customs and Excise officers to badger me he condones and excuses it. Customs and Excise officers are used to dealing with smugglers and racketeers, dope peddlars, bootleggers, forgers and counterfeiters and the methods they use for that kind of investigation should not be used to coerce and browbeat ordinary citizens going about their normal business.
My constituent continues:
My accountant fills in my income tax return and I sign it. The income tax authorities do not ring me up and demand to see my books. If they did, I would have to explain that I did not have any books and that my accountant has them. I would then refer the authorities to him. I am an actor, not an accountant … I realise that actors are still classed as rogues and vagabonds and the casual nature of our employment does not allow us to fall into any regular pattern or pigeon hole and that the foremost thought in any bureaucrat's mind is to keep the office and the records straight over everybody else's dead body. However politely any official cuts your throat, it is not an experience to be relished.
I see that VAT hold me responsible for completeness and accuracy of accounts and


returns. Who do I hold responsible for the correct interpretation of the VAT legislation which changes with great frequency and taxes the minds and ability of the most talented accountants. My accountant refuses to deal with it. I freely confess that for the past 40 years accounts, records, and business of that sort I have always left to my agent and my accountant. I am 58 years old. Do I have to start taking a special course in governmental legislation? Who is to pay for my training? Do I get an allowance for it—less VAT of course.
Then he comments on specific points in the Minister's letter. He rejects a statement in the Minister's letter that he had never objected to visits by officials to his home. The passage in the Miinster's letter is as follows:
It is relevant to add that Customs and Excise policy, as outlined above, has been applied in respect of visits to very many professional persons in a similar position and that experience since the inception of VAT has amply demonstrated the validity of this practice in relation to efficiency of control, It is recognised that removal of records for this purpose causes some inconvenience and expense, and this is regretted; but visits of this kind do not normally take place with any great frequency, and reasonable notice is given on each occasion.
On that point my constituent says in his letter:
In my opinion it demonstrated that VAT officers are prepared to walk roughshod over any and everybody without their having any redress. It is quite ironic that it should be run by civil servants, who in my experience are not civil and do not act like servants.
5.30 p.m.
My constituent then deals with the provision of duplicate forms, something for which he had originally asked. The Treasury's comment on this matter was as follows:
As regards the question of the provision of duplicate forms, the position is that Customs and Excise used to provide duplicate forms VAT 100 on request, but in view of the paper shortage it was decided that they would not be justified in acceding to requests for blank return forms for the purpose of making copies for retention. In present circumstances taxable persons are normally expected to make their own arrangements for retaining copies of returns. However in individual cases, and on written application to Section SD, VAT Central Unit, Alexander House, 21 Victoria Avenue, Southend-on-Sea, Essex, SS99 1AT, Customs and Excise are prepared to supply a single blank return form to serve as a master copy for reference purposes.
There is no limit to their generosity. My constituent does not seem to have been very impressed by that. He says of the reference to a paper shortage:
in view of the numerous and voluminous publications about VAT that frequently clutter

up one's letter-box, that would make a cat laugh.
He goes on:
I see that taxable persons are normally expected to make their own arrangements for retaining copies of returns. This aptly demonstrates the arrogant, high-handed, dictorial and impudent attitude of the VAT official mind that seems to have contimated the Minister. However, I shall write and see if they will deign to supply me with blank returns for reference purposes.
My constituent says:
I am sorry to go on so long and tediously"—

Dr. Colin Phipps (Dudley, West): Hear, hear.

Mr. Onslow: I do not see why he needs to apologise. He says:
but I feel that a fundamental principle of British democracy is at risk here.
That is something with which Labour Members do not appear to agree. My constituent goes on:
In England I was brought up to believe that a person was innocent until proved guilty. Increasingly in official minds this is being reversed and we are being assumed guilty and now have to prove our innocence … It is now suggested that these powers he extended to income tax officials who will be able to insist that your children (shades of the Hitler Youth and the Gestapo) and your wife testify against you. And the crowning argument of all is 'If you are innocent you have nothing to fear.' The awful point is that if you are innocent you have everything to fear An official can make a slanderous allegation against you with impunity and you have to prove your innocence. If an ordinary person were to call you a liar, a thief, a drunk and a cheat you could sue them and teach them a very sharp lesson. But now it is being arranged for these things to be implied against you and the innocent person, who is harassed, upset and humbugged about, has no redress.
My constituent ends with a reflection, remembering a conversation he had a number of years ago with an expert on tax affairs, when he had said to the tax expert: "There must be an enormous amount of tax money you can never collect or get hold of it." The expert replied "That's nothing to the money we have that we shouldn't have."

Mr. William Clark: Throughout the country people are thinking that the Government have a fixation about tax evasion. In reply to a parliamentary Question last Thursday, in which I endeavoured to extract from the Chancellor the number of extra personnel who would be required to carry out


these search powers, I was given the answer "None". That struck me as a bit odd. Here is the Revenue, or someone, saying that there is massive tax evasion and therefore powers of search are needed and yet the number of personnel is not expected to increase.
I put some specific questions to the Chief Secretary. Does the Inland Revenue agree with these powers? This is extremely important. The last time we had the opportunity of discussing the search and all that that implies was during the proceedings of the Select Committee considering the wealth tax. I refer to Volume II, page 49 and the answer to question No. 304, which funnily enough I posed to Mr. Green and Mr. Beighton. As will be known by everyone, Mr. Green is the Deputy Chairman of the Inland Revenue and Mr. Beighton is an Assistant Secretary. Their positions may have changed since February 1975. In answer to my question concerning the search Mr. Beighton said:
I do not think that we necessarily propose that there would normally be powers to search. Whether there might be occasions on which the Inland Revenue would want to go to the courts as they can now, and ask for powers to search is perhaps for consideration. However, in the normal course, I do not think we would be likely to be going before Parliament and saying, Please can we, without any warning and without any notice, even if we have no reason to suspect the veracity of the man's return, have powers to go into his house and ask him to turn out every drawer he has?'
That is a fairly serious thing to say. A week later Mr. Beighton, again dealing with this question of the power of search, said:
I do not think we would need specific rights of entry for the purpose of dealing with household and personal goods.
He talks about household goods and a little later says:
We did suggest last week that probably we would want the same sort of rights as we have under the current position, in other words, we ought to have the power to go to the court and say, 'We think this is a proper case for us to be allowed to go in', but we are not thinking in terms of blanket powers to enable us to march in on a taxpayer and demand to look around his property without warning.
There is an explanatory note given by the witness in which it is said:
In appropriate cases the Revenue avails itself of the power to search conferred by

the Forgery Act 1913; Revenue Statutes, however, confer no general power of search.
I repeat my question. Is the Inland Revenue happy with taking of these powers? I hope that the country and House will be alerted to the fact that these are sweeping powers. Instead of entertaining this tax evasion fixation I wish that the Government would look at the other side of the balance sheet and see where they could start saving the money which they are currently wasting. The powers they propose to take are massive. They represent a diminution in freedom, in the right of a man to enjoy privacy in his own house.
I cannot think that these powers have no connection with the introduction of a wealth tax. When a wealth tax is introduced, if it is, it will be extremely unpopular. If, at the same time, the Government were to take these powers of search there would be an uproar. The Government hope that by using "Softly, softly" tactics, and bringing the legislation in in dribs and drabs, the public will be deluded. I hope that the public will not be deluded. Certainly we are not deluded. I hope that my right hon. and hon. Friends will push this matter to a Division.

Dr. Phipps: I would not wish the Opposition to believe in the notion of a defenceless Chief Secretary incapable of looking after himself. I do not specifically rise to defend my right hon. Friend. I take the point, which many of us regard as serious, made by Conservative Members. The principle at stake is one with which the House has been faced over many years and no doubt will be faced again. Surely the principle in all matters of this kind, when we are speaking of individual liberty, concerns the degree of abuse of the laws of this land we are prepared to accept before we feel it necessary to introduce a degree of restriction of liberty on the few to preserve the liberty of the many.
By and large this is precisely the kind of legislation being put forward today. It is now widely accepted that there is a large and considerable degree of tax evasion. For the great majority of people this possibility never arises. The bulk of the population pay their tax as they earn it. There would be no question of their being subject to snoopers, or any other kind of interference with their individual


liberties. These are the people, by and large, who have to be protected. These are not the people who are evading tax. There is no possibility of evading tax if one is an ordinary worker operating on the PAYE system.

Mr. Tony Newton (Braintree): Would the hon. Gentleman accept that we were debating a day or two ago the question of the limit on a child's income before a father starts to lose a tax allowance? Can the hon. Gentleman be confident that every working-class boy doing a paper round is having his income declared to the Revenue by his father?

Dr. Phipps: I can be absolutely confident that the loss to the Revenue in such a case is minute in comparison with the loss which might be occasioned by a major tax evasion. Let us be sensible. This is what we are discussing. We are not discussing the lady who goes out "charring" for 50p per hour for five hours a week or the boy who does the paper round. We are discussing major tax evasion. It is a perfectly legitimate defence of the ordinary citizen that major tax evasion should be subject to examination by the Revenue. I understand that warrants would be required for the kind of entry discussed. After all, evading a tax is as criminal an offence as anything else for which a warrant is required.

Mr. Nicholas Ridley (Cirencester and Tewkesbury): The hon. Gentleman is putting a proposition that if someone robs a bank but steals only £5 it does not matter.

Dr. Phipps: As a magistrate, I would regard robbing a bank of £5 and robbing a bank of £500,000 as very different matters. The law recognises the difference as such and provides for different sentences for offences of that kind. We are looking here at a practical problem. Hon. Members can make points about the scale of what we are talking about, but by and large everyone understands that my right hon. Friend is bringing in this provision to tackle major tax evasion. There may be ways of tackling minor tax evasion, but major tax evasion must certainly be tackled, because it is a scandal. If it cannot be tackled in any other way. it requires the right, with a warrant, to enter if necessary and examine books to discover whether such evasion is going on. We as citizens ought to realize

that this is designed as a protection. It is the degree of the abuse which is important.

Mr. Peter Rees (Dover and Deal): The hon. Gentleman should not shelter behind the Chief Secretary. What grounds has he for thinking that there is widespread abuse of the tax system?

Dr. Phipps: If the hon. and learned Gentleman wishes me to do so, I can go into some detail. We were both members of the Select Committee which dealt with the wealth tax. In the evidence, I brought up quite a large number of cases of the kind of evasion going on, and also of possible evasions. I refer him to those proceedings. I mentioned many of the forms of evasion available, they are quite major, and I believe that they are being used. If this power is given, subject to warrant, for the purpose of catching major tax evasion, it will be protecting the ordinary citizen. That is acceptable in exactly the same way as a warrant is issued in the case of any other criminal offence. I see no reason why the Committee should not accept it.

Mr. John Pardoe (Cornwall, North): Before any of us fulminate against the Government's proposal, we should get one thing straight. We are not supporting tax evasion. I remind the Chief Secretary of my remarks on Second Reading and that I at least take tax evasion as a very serious matter. I am not proposing to be soft on it.
We have heard the right hon. and learned Member for Surrey, East (Sir G. Howe) in great form, waxing very angry about what he called the hypocrisy of the Chancellor of the Exchequer. Before we are through, no doubt we shall have an enormous legal tome called "Howe on Hypocrisy". The right hon. and learned Gentleman quoted extensively from our debates in 1972 and rebutted the Chancellor's then accusation of hypocrisy. As I am sure the Chief Secretary will recognise, hypocrisy is a two-way thing. It is becoming a habit for speeches to remain on the same side of the House although the parties may move from one side to the other. Sometimes I wonder whether a member of the Front Bench who crosses the Floor does not leave his speeches behind in the Dispatch Box for his successor of the other party to take out and use the following year.
I hope that everyone who reads of reports today's debate will read in detail the debates we had on the 1972 Finance Bill and compare them with this debate. They will find that reading not very attractive. They may even feel a sense of shame about the operations of this place.
The right hon. and learned Member for Surrey, East said that he and the Conservative Party proposed to oppose this measure root and branch. So do I. He said that it would invade the right of privacy and secrecy to an extent that is intolerable, and I entirely agree. But these are precisely the same powers in almost every detail as were passed by the Conservative Government in 1972. I see that the hon. Member for Horsham and Crawley (Mr. Hordern) nods assent. He at least did the honourable thing. He attacked his own Government then time and again for the introduction of these powers in their application to value added tax.
5.45 p.m.
I understand that it is perfectly possible for Members of the Conservative Party to change their minds—it is perfectly possible in any party. But is this latest change of mind only because the Conservatives have changed their side of the House? Or is it because some new facts have come to light about the workings of these powers which they introduced with relation to VAT? But it is not just a question of facts. There are no facts which could have come to light on the working of the VAT powers which could have substantially changed the principle. The right hon. Member for Down, South (Mr. Powell) spoke about principle, and it is with principle that we ought to be concerned in this debate.

Sir G. Howe: I made clear two points which the hon. Member for Cornwall, North (Mr. Pardoe) ought to take into account. The first was our concern that these new powers in any event go far beyond anything expressed in 1972. They extend far more widely. They apply to every income tax payer and not just to registered traders. Therefore, they extend into every home and not only into homes used for trading purposes.
Secondly, we have now experience of the way in which the 1972 powers have

been used. I quoted cases which have given rise to concern outside this House. These powers gave rise to concern in 1972. Our experience justifies our now taking a much more comprehensive view, to put it no higher, of these present proposals.

Mr. Pardoe: I do not accept that these powers go very much wider than the VAT provisions in 1972. It is true that if they were applied to every income tax payer they would apply to a much greater proportion of the population. The argument was taken up in 1972 on the numbers which would be involved. But one of the arguments put forward by the Conservative Government in 1972 against the present Chancellor of the Exchequer was that VAT covered so many more people, and that therefore it was necessary to have these powers whereas it had not been necessary to have them with purchase tax and selective employment tax, which brought in about the same amount of money.
I do not accept that the points raised by the right hon. and learned Gentleman are material to changing his general position about the principal of these provisions. For example, is it true that today VAT is easier to enforce than was supposed in 1972? I have absolutely no evidence that enforcement is easier now than it was then.
The right hon. and learned Gentleman said that it was always stated in 1972 by the Conservative Government, that these powers in relation to VAT would be reviewed if in practice they became intolerable. But enough warnings were given—a great many of them by Conservative Members. The situation was clearly pointed out to the Conservative Government in 1972. It was pretty intolerable then. I agree that the burden of these powers in their relation to VAT has become totally intolerable by 1976, but I do not see why the Conservative Government did not accept the arguments then. Have there been more cases of their being used than they expected? I have not heard any evidence to that effect.
The right hon. and learned Gentleman says that it can now be seen that these VAT powers were inappropriate. Is there any legislation which the Conservative Government passed which has not subsequently proved to be a disaster? Is there


any part of that Government's legislation which he does not regard now as inappropriate, whether it be the Water Act, local government reorganisation, the Industrial Relations Act, the reorganisation of the National Health Service—we could go on with the list all night?

Mr. Powell: And the European Communities Act.

Mr. Pardoe: I expected the right hon. Gentleman to put that in. We fought that battle and will have to re-fight it many times.
All I am saying is that it is not very different from 1972. I strongly suspect that the only material difference is that the right hon. and learned Member for Surrey, East now sits on this side of the House and that the Chief Secretary sits on the other side. I would bet my bottom dollar that if the right hon. and learned Gentleman were now in the Chief Secretary's position, he, too, would have surrendered to the Inland Revenue Staffs Federation, political bigotry and all. He, too, would have accepted the requirements of the Revenue to invade the privacy of people's homes.
We simply cannot continue with this ludicrous pattern whereby a Government introduce some new intrusion into privacy, pass laws to that effect, and the Opposition fulminate, rage, and say all manner of terrible things, after which they become the Government and do not scrap those laws. This Government have not scrapped the powers on VAT. If we go on like this, with Governments swapping backwards and forwards, without any attempt to scrap these laws, liberty will cease to exist entirely by a gradual process of parliamentary erosion.
The right hon. and learned Gentleman said that he was sorry there was not a Law Officer in the debate. He said that it was the duty of the Law Officers to advise the House of Commons on matters of privacy and intrusion. He was a Law Officer in 1972. Did he come to the House of Commons and warn us all that in 1976 we should be deeply sorry we had passed these things? No, he did not. He stayed away, of course. He did not come near us during those debates.
I suggest that "Howe on Hypocrisy" will be quite a tome for reading in the future. This is a disgrace to parliamentary democracy and the danger is that we

are all coming to accept that it is quite normal for it to happen. It is no wonder that more and more people think we are taking part in a charade and a farce.
What, then, is the solution? There has to be a solution to this problem of tax enforcement, unless we are prepared to introduce taxes which no one in his senses will pay, I say to the Chief Secretary that the major solution is not to tax a free people to the level that ordinary reasonable men regard as unreasonable.
In the Second Reading debate I used the analogy of smuggling in Cornwall in the eighteenth century. People did not regard the taxes as reasonable and were damned if they would pay them. They did not pay them, and the Government could not, even by hanging, force them to do so. We have reached that same stage in relation to income tax today.
I do not understand why the Government require these additional powers. I hope that I can have the attention of the Chief Secretary on this, because I have some specific questions to put to him about what is wrong with the present powers. Under the Taxes Management Act 1970, a Board of Inland Revenue officer can by notice require delivery of copies of accounts and documents relevant to income tax statements already requested of a taxpayer. That seems to meet the point about documents.
The production of a document in the hands of a stranger to court proceedings can he secured by a subpoena duces tecum or a witness summons. Why, therefore, do we need these additional powers? As to the powers sought in, regard to entry and search for documents—relevant to Section 20B in the schedule—the power of entry and search on private premises has always hitherto been very substantially restricted and limited. The power is restricted to police where a person is to be arrested, or is reasonably expected to be arrested, under the Misuse of Drugs Act 1971, or in pursuance of a valid warrant. It is restricted to immigration officers, under the Immigration Act 1971, where they wish to satisfy themselves whether there are immigrants on an aircraft or ship. The search is specifically restricted to the aircraft or ship. They cannot, under that Act, enter premises.
It is also restricted, by information on oath, to Customs officers who under the


Customs and Excise Act 1952 have satisfied a justice of the peace to order the issue of a warrant if there are reasonable grounds to suspect that items liable to forfeiture are kept in a building or place. Lastly, the power is restricted to local government employees under various statutes in certain very specific circumstances. I do not see why we need to extend the list in this situation, and I see no reason why in particular we need to add the proposals that we have before us.
I do not see how we can distinguish between major tax evasion, which the hon. Member for Dudley, West (Dr. Phipps) was trying to tell us about and non-major tax evasion. We have already found that in the case of VAT the power is being applied right down the scale to very small traders indeed, in a way which I doubt whether Parliament ever realised would happen. We were told by the Government in 1972 that this was meant to be applied only to major tax evaders—people who were trying to get away with murder in tax evasion—but we find that it has been applied at very low levels.
The hon. Gentleman may well say that it will not affect his constituents. That is a very unconvincing argument. For he cannot stand up in this House and say that none of his constituents at relatively low levels of income ever evades taxation. I am not accusing just the hon. Gentleman's constituents, or just mine. But there is no one here with his eyes open who does not know that a very large numbers of our constituents are evading taxation at quite low level of income.
This is done by moonlighting, and by taking supplementary benefit or unemployment benefit and doing a job on the side. There are very many ways in which it is going on, and sooner or later some Government will decide to clamp down on this and will use the very powers that we are being asked to pass in this clause. The Government will use the powers on taxpayers at a very low and humble level.

Dr. Phipps: I did not say that my constituents were not evading tax. I made the point that there was tax evasion on a small scale but that the whole

purport of the current legislation was to tackle major tax evaders.

Mr. Pardoe: I am quite aware that the hon. Gentleman said that in the second part of his remarks, but in the first part he said that it was almost impossible for those on PAYE to evade income tax. It is not impossible for those on PAYE to evade income tax. It happens all the time. It may not be a very large amount of money, but much of the VAT evasion is not very large and the powers are used in that respect.
I say to the Chief Secretary that it these powers are necessary they should not be introduced without a substantial quid pro quo in tax efficiency. That would mean having a self-assessment system. There might well be a stronger argument—although I am certainly not making it here and now—for these powers if we had a self-assessment system for all income tax, and then said that anyone in the 10 per cent. sample caught infringing tax regulations would be punished very hard. We might need very substantial powers on these lines if the sample system was to be worked effectively.
That might be arguable. What is not arguable is that we should go ahead with the present system, which does not save a single officer and does not mean that we shall be able to work the system more efficiently or save money. But apparently we have to pass these very stringent laws in spite of that.

Dr. Phipps: Would the hon. Gentleman not agree that in the case of the self-employed person who withholds information from his accountant, we are effectively already dealing with a self-assessment system?

Mr. Pardoe: Yes, indeed. In the case of some of the self-employed, we are dealing with a situation of self-assessment. To a large extent on all Schedule D incomes, whether one is self-employed on all one's income or on part of it, it is a self-assessment system. But not everyone is self-employed, and even there the Government have not made out a case for these very stringent powers at this stage.
6.0 p.m.
My second comment to the Chief Secretary is that the proposed legislation, in my view, will have the opposite effect to the


one that he imagines. It will encourage further attempts to evade by those who are so minded. I should prefer to see encouragement to become honest by creating an indictable offence of, say, aggravated tax evasion, where the sum involved is, say, more than £1,000. It would then be triable in a Crown Court, and I suggest a maximum penalty of five years up to £100,000 and 10 years above that figure. If we had penalties of that kind, we would deal with tax evasion without giving Inland Revenue officers all these totally unnecessary powers.
The Chief Secretary does not need the powers, and they were castigated by the Chancellor back in 1972. I hope that the Chief Secretary has read the debate on 12th June 1972. If he has not, I am happy to pass him my own marked copy. It is a disgusting read. It is even more disgusting when it is compared with the speech today of the right hon. and learned Member for Surrey, East, because there we see hypocrisy galore.

[Mr. A. P. COSTAIN in the Chair]

Mr. Ridley: The hon. Member for Cornwall, North (Mr. Pardoe) underlined the duty of Governments to propose and the duty of Oppositions to oppose. He seemed to find some virtue in Liberalism in this rather obvious position. It seems to me that what is lacking in him and in the party that he espouses to lead—we wish him every success—is a dose of responsibility—actually to have to propose and to have to defend—

Mr. Pardoe: A dose of power.

Mr. Ridley: A dose of power, yes. The hon. Gentleman agrees with me. Although on this occasion he is right, it is too easy a course to assume that the mere fact of government will allow one to preserve all one's liberal principles intact.
I was glad, Mr. Costain, that your predecessor in the Chair did not call me from the other side of the House. Sitting where I was at that stage, I thought that I might have been able to see the Chief Secretary's speech, all carefully written out for him by the Inland Revenue staff.
The Chief Secretary will probably keep asking the Opposition "Are you in favour of tax evasion?" The latest technique of the Governorment's orators is to keep asking the Opposition whether or not they are in favour of something. We had this endlessly with the Chancellor's

deal with the unions: "Why do you not welcome it?" It happened six times a day. It was a sort of "Have you stopped beating your wife?" question. I am sure that we shall have it from the Chief Secretary today: "Are the Opposition against tax evasion?"
As the right hon. Member for Down, South (Mr. Powell) evidenced flogging, so I evidence sheep stealing. It was not all that long ago that a person could be hanged for stealing a sheep. When that was abolished, I have no doubt that the Government or the reactionary trusty defenders of the past like the Chief Secretary would have said continually to the abolitionists "But are you in favour of stealing?" Mind you, Mr. Costain, in a way, stealing is perhaps a slightly more severe offence than not paying taxes. We have too readily slipped into the assumption that to take from someone else is exactly the same as to evade one's taxes.
It seems to me that there is a slightly higher degree of crime involved in pinching from one of one's fellow men than there is in failing to yield to the public that which the public has levied upon one and which one might not entirely accept as a proper level of taxation.
I am very interested in this problem, because last week the Select Committee on Nationalised Industries published a report on the readiness with which gas and electricity boards disconnect consumers for not paying their bills—that is, for stealing. Refusing to pay a bill is not to give what one should give. In a sense, it is very similar to tax evasion, although just a degree or two worse, because one has actually consumed the electricity, whereas with paying tax one has had absolutely nothing.
The Select Committee's Report says, on page 7:
To use disconnection in this way, as a kind of sharp warning, is we believe inappropriate to an age when (for example) provisions for security of tenure and protection against harassment for debt have been successively extended by Parliament and accepted by society as a whole.
Why should we feel so lenient about those who do not pay their electricity bills and so infuriated by those who do not pay their taxes? I can suggest an answer to that question. It is that in the minds of Government supporters those who do not pay their electricity bills are


small people, old people, people on short means and people on supplementary benefit. Tax evasion, of course, is practised only by the rich. Only those who have enormous untold heaps of money ever go in for tax evasion. For that reason, it is right to bring in these Gestapo, Spanish Inquisition-type powers, to deal with the rich tax evader. But we must forget about the poor person who does not pay his bills.
This was evidenced by the hon. Member for Dudley, West (Dr. Phipps) who, having been drummed up as part of the stage army to show that even Socialists were interested in this debate, was rash enough to make a speech and to bring in with him his bogus sense of Socialist morality which he evidenced by saying that he did not think that a court should convict someone who stole only £5 but that if he stole £50,000 that was wicked. That is the de minimis argument; it is the "housemaid's baby" argument. It does not matter what the crime is so long as it is a small one.
These powers are totally inappropriate for dealing with the smaller forms of tax evasion. Let us take the case of the moonlighter. We know that there are propably millions of people who have other jobs to which they go and draw cash for their labour. There cannot be a single hon. Member who has not personally experience of meeting some of them, or at least of hearing about some of them.
In the middle of the night, there is a knock at the door. "Inland Revenue here. I want to speak to your husband and search for his documents." The housewife says "He's gone out moonlighting". There are no documents, because the very essence of moonlighters is that they do not keep documents. There may be a drawer stuffed with pound notes, but there is no evidence to show from where they came. The powers are totally inappropriate in that case.
Let us take another example, which hon. Members have been too squeamish to mention. Let us take the case of the prostitute. In the middle of the night, there is a knock at the door. "Come in." "We have come to search your books." One can imagine the scene that will develop from this syndrome, and who will

win that battle is not for me to say. These powers are not suitable for people of this kind, yet that is where the vast bulk of the money goes. It is not a case of a few men cheating by millions, but of millions of men cheating by a few pounds.
It is intolerable that the purpose of this clause is to go for one class of society, because it is thought politically safe for the Government to do that and because it is thought that these are people who cannot be described as ordinary working people. I heard the right hon. Member for Lanark (Mrs. Hart), who is one of our tax experts, along with the hon. Member for Dudley, West, say in a radio interview that these powers are not intended to apply to ordinary working people—the OWPs. These powers may be applied to OWPs, but they arc being presented on the basis that they will not. It is disgraceful.
What will happen if Inland Revenue officers discover something else in their searches? Suppose they find a packet of drugs, or evidence of theft or other crimes. Will they be prepared to inform? Suppose they discover personally embarrassing matters. The opportunities for prosecution or blackmail will be there. How are their powers to be delineated? There is no power of random search in cases of burglary, robbery, drug peddling or murder. Ours is becoming a society in which crimes that are dangerous to the population are treated as less serious than crimes that offend against the Socialist ideal.
To seek powers of this sort because we think there may be a few rich people who are not paying taxes through fraudulent means, whereas all the heap of human weakness and sin, verging on the criminal, that goes on among us is not to be subject to random searches, is to get our priorities entirely wrong. It is to elevate class hatred above protection of the community. When the hon. Member for Dudley, West says that these powers are necessary for the protection of society, he is really saying that he is prepared to subjugate powers that protect society to his desire to pursue a vendetta against the classes in this country who have carried on businesses, earned money, provided employment and made it possible for us to have as high a standard of living as we have today.

6.15 p.m.

Mr. Douglas Crawford: I do not wish to detain the House for long in putting on the record the position of my party in this matter. In doing so, I would state a truth that is self-evident to most people, though not, perhaps, quite as self-evident to the Government. Governments rule by consent of the governed and taxes are raised with the consent of those from whom they are raised. England and Scotland both have great charters enshrining individual liberty. The people who assembled at Runneymede in 1215 and Abroath in 1320 would not be enamoured with Clause 48, especially the part that refers to Schedule 6(20B)(2).
At a time when there is much talk about personal liberty, the effort by the Government to impose Clause 48 as it stands is a considerable threat.
As for the growth of computerisation, there is a need for citizens to know what particular information about themselves is being computerised. Not only should they have the right to know what information is on the computer; they should have the right of access to it whenever they wish. Access to that information by anyone else should be severely limited.
It may not be known to hon. Members, but if a person defaults for two weeks on payments on his credit card he can, if the computer is programmed incorrectly, be described as an undischarged bankrupt without his knowledge. There is a need for the individual to have access to the computer files and to be able to find out what is said about him.
The hon. Member for Basingstoke (Mr. Mitchell) said that an Englishman's home is his castle. In Scotland we are not that affluent, though the hon. and learned Member for Kinross and West Perthshire (Mr. Fairbairn) could truly make that claim. But then, perhaps, he is more English than the English. However, we have homes in Scotland, and they should be private. If our privacy is invaded, as with computerisation, we should know what is being required of us, what is being taken away, and whether our desks or our pockets are being invaded.
The Younger Committee on Privacy, which concentrated mainly on computers,

said that citizens should have a right of access to computer files. The same applies in this case. If a person's home is invaded he should know the purpose behind it. The Bill contains no provision for this. I should like to read the relevant part. Schedule 6(20B)(2) provides that
On entering the premises with a warrant under this section, the officer may seize and remove any documents or other things whatsoever found there which he has reasonable cause to believe may be required as evidence for the purposes of proceedings in respect of such an offence as is mentioned in subsection (1) above.
There is no mention of the police, or whether one may have a legal representative present at the time when the warrant is presented.
It was said earlier that this, in effect, meant that a person was being considered guilty until proven innocent. That is the precise opposite of liberty of the individual. The clause is monstrous. It should be resisted, and the amendments supported.

Mr. Peter Hordern: I am sorry the hon. Member for Cornwall, North (Mr. Pardoe) has left. He felt that the best way to deal with tax evasion was to increase substantially the penalties. I think that the best way is to reduce taxes so that there is not so much incentive for people to defraud the Inland Revenue.
That is the difference between our approach and that of the so-called Liberal Party. It is curious that the Liberals, of all parties, should be suggesting that we deal with this problem by increasing penalties rather than by diminishing taxes.
I am glad to have been called on this subject, even though I feel like the person who is the only one not out of step.
As every hon. Member has reminded us, this subject has been discussed at some length. I remember that in 1972 there was considerable concern about the extensive powers that the Customs and Excise wanted for the discharge of VAT duties. That concern was voiced by the President of the Law Society and Chairman of the Bar Council and there was a long and impressive correspondence in The Times and other newspapers.
All that I say about that time is that the argument I put forward from the


Government Benches—I was supported by Mr. Peter Trew, who was then the hon. Member for Dartford—was that the powers that the Customs and Excise authorities were seeking were wrong in themselves—far too extensive and quite different from those that had obtained for a very long period. These powers were based not on purchase tax, which was originally suggested, but on the very old Customs and Excise Act 1823. That was the origin of the powers. They have nothing to do with VAT. The powers of entry and search originated in 1823. They were given to Customs officers to stop smuggling and to enable them to try to count the barrels of rum, the kegs of brandy, and matters of that sort. The powers were transported almost word for word at the time of purchase tax.
Purchase-tax was introduced as a temporary war-time measure. It is understandable that the powers were considered suitable at that time. Purchase tax applied to only 70,000 traders. My objection to the extension of the powers under the VAT proposals—Mr. Peter Trew supported me—was that they were to be extended not to 70,000 people but to 1½ million.
We now see the proposals carried forward almost word for word as they appeared in the VAT proposals. I cannot help but remind the Committee of some of the things that were said in Standing Committee by the present Chancellor of the Exchequer in 1972. He said of my hon. Friend the Member for Worthing (Mr. Higgins), who was then the Financial Secretary, that he had
forced the Committee to accept a vast extension of the Customs and Excise powers, amounting to a snoopers' charter.
In the same column he said
they have given power to the Customs and Excise to violate the privacy of millions of our fellow citizens, never subject to this violation before, so that they can check whether the information given in this form is accurate and honest." — [Official Report, Standing Cornminee E, 14th June 1972; c. 837.]
It is a strange metamorphic of the Chancellor of the Exchequer, who was then so eloquent as Shadow Chancellor in saying what he did about the powers which were given under VAT. However, the powers in the Bill are to be reinforced even more and will apply to a substantially larger

section of the public. They include those under Section 20B, which allow the offices of a taxpayer's barrister, solicitor or accountant to be broken into at any time of the day or night and for papers to be searched.
I know it will be argued by the Government that these powers will apply to only a handful of cases, namely, to those who defraud the Revenue regularly. It is said that it will be necessary to prove that they have perpetrated fraud. I shall take up that argument, but, as my hon. Friend the Member for Cirencester and Tewkesbury (Mr. Ridley) argued, the massive tax evasion in this country is carried out not by the relatively few tax evaders but by the hundreds and thousands and, dare I say, even millions of people who work a little bit on the side here and there. That form of tax evasion, I should think, is far greater in sum than the evasion practised by the handful, if that is what the Government say it is, of those who are guilty, for that is the word, of tax evasion.
I wonder just how alarmed that handful of people will be by these measures. Will they be alarmed by the thought that their solicitor's offices or accountant's offices may be broken into at any time of the day or night and that papers will be revealed for all to see? Surely those in that position will have very careful advice from their advisers to transfer their affairs to Leichtenstein, or some other such country. The idea that the Revenue will be able to find those people is rather far-fetched.
Surely the transition from Opposition to Government should not have transformed the Chancellor from the great defender of human rights that he purported to be in 1972 to the pliant tool of the Inland Revenue. It seems that the Chancellor is Mr. Plant's plant. Schedule 6(2)(3) provides that taxpayers are to make documents available on behalf of their spouses or on behalf of any sons or daughters that they may have. These measures also relate to widows. They apply even when the subject of inquiry is dead. I suppose we should be grateful that the only thing the Revenue has stopped short of doing is making provision to subpoena St. Peter, but that may well happen before long.
I shall examine Mr. Plant's claim that he is the originator of this measure. Perhaps we should not blame the Chancellor.


We all know what happens in these affairs, and particularly under this Government. Clearly they have been got at by the Inland Revenue. In an interesting article in the Sunday Times Mr. Plant said:
The mere omission by a taxpayer from his return form of an item of income does not necessarily involve fraud; he may, for instance, have honestly believed the item was not taxable; yet again, though knowing it was taxable, he may have omitted it through mere negligence or carelessness.
That was his view.
That is almost word for word what the Chancellor had to say about the matter on Second Reading. In fact, he quoted Mr. Plant, and I am sure that he did so with great care, so that his words should not be misunderstood in any way. Quite apart from the propriety of Mr. Plant's laying down what the Chancellor should say, I am rather concerned that Mr. Plant, who, I imagine, is a civil servant, should write articles of this kind and give advice to the Opposition. After all, that is what he did in his article.
In a later passage in the same article Mr. Plant said that
Ministers stand apart from the detailed operation of the tax system, and it is important they should do so lest any possible claim be made that important decisions affecting individuals could be influenced by political considerations.
If that is true of Ministers, it is certainly true of civil servants. Surely that is true of Mr. Plant as well.
Let us examine Mr. Plant's proposals. There has been some correspondence in The Times on the matter by people who know what they are talking about and who are legally qualified. In a letter to The Times on 7th May a Mr. Newbold wrote:
The novelty and the danger in these new provisions is that it extends the power of the Revenue to obtain search warrants to non-criminal cases.
He then wrote:
The truth is that 'fraud' is not necessary a criminal offence and fraud forms part of the civil law … It is therefore entirely possible on the state of the law as it now stands that an omission of something from a tax return could result in a warrant being obtained under the proposed powers.
I prefer Mr. Newbold's thinking on this matter to that of Mr. Plant. I hope that the Chief Secretary will deal with the matter and set out exactly what the definition of fraud should be and whether, as I believe is the case, the Revenue now has

power to go in merely on suspicion or on the understanding that there may be a case of fraud. It is my belief that it has every right to enter and search premises on the mere suspicion that this may have happened. All that the Revenue has to do is persuade a magistrate, such as the hon. Member for Dudley, West (Dr. Phipps), who is apparently a magistrate, that the powers are required. I regard with great admiration the powers of the hon. Gentleman, but judging from his remarks this afternoon I do not regard him as the best expert on tax or on law in this place. If he is a typical example of a magistrate, I am concerned what the situation may be—[Interruption.] Does the Chief Secretary wish to intervene?

The Chief Secretary to the Treasury (Mr. Joel Barnett): No.

Mr. Hordern: The argument is put forward that these powers exist in other countries and that we should not be so fussed about them. I do not think that that argument is any good. The fact is that in the United States, where I understand such powers exist, there is the power of self-assessment. In this country we see the number of tax inspectors and those employed by the Inland Revenue grow every year.
The Inland Revenue's objective—this has been stated quite openly to the Public Accounts Committee—is not to raise more revenue but to ensure that the revenue is paid into the Exchequer. That may be a very good view, but the fact is that the number of tax inspectors and others employed by the Inland Revenue is growing very quickly. I believe that that is happening at the expense of the net intake into the Exchequer. It is a fact that the number employed by the Inland Revenue in the United States is exactly the same as in this country, and the number here is growing all the time.
6.30 p.m.
I do not see how Mr. Plant's clause—for that is what it is—can be operated on a selective basis. I do not think that Mr. Plant will be able to investigate only those who have committed fraud, or those who have been suspected of committing fraud, amongst the wealthier members of the population. If these powers mean anything, they must be applied also to those who have been suspected of cash transactions, of moonlighting, of earning a little on the side,


and so on. The powers cannot be applied selectively.
I do not know whether the Chief Secretary will use this in his argument, but I should like him to pay particular attention to this point. It would be wrong and indefensible, and a new principle in our tax powers, if there were any element of selection about these powers to be used against one section of the population and not against another.
I am alarmed about the increase in powers that the Inland Revenue has sought and obtained in recent times. Not long ago we debated, late at night, the powers to be given to those who were sub-contractors in the building industry. They took the form of new tax exemption certificates. These were certificates with photographs on cards. I said at the time that I thought that it was a dangerous innovation. It is not too fanciful to suggest that the powers now being sought by the Inland Revenue will be used in a very different fashion in years to come, perhaps by a Government of a very different complexion from this one. After all, this Government are too wet to be worthy of any serious consideration. Some years hence a different Cabinet may well be armed with the powers to apply a very different regime in this country. It is time that that point was made.
I can just imagine the prospect of Mr. Plant bursting into taxpayers' homes. I can imagine the reception that he will get. I can also imagine what the Chancellor of the Exchequer would have said if he had still been on the Opposition side of the House, as Shadow Chancellor, the great defender of human rights, liberty and privacy, instead of the pliant tool of the staff federation—for that is what he has become. It is all part of a piece. First, he was all deference to the trade unions. Now he is all deference to, and the pliant tool of, Mr. Plant himself.
I notice that when the Chancellor is on a weak point he generally takes it upon himself to have a go at the Opposition. He did so in a recent article in the Sunday Express, in which he said
But when the whole world is praising our achievement"—
I must say that I had not entirely noticed that—

the British Conservatives confine themselves to grumpy nit-picking, and some of them go further.
The new breed of Tory Trotskyites has joined with the extreme Left in attacking the new pay deal and accusing the trade union leaders of betraying their members.
That was the Chancellor having a go at us.

Mr. Joel Barnett: Read on.

Mr. Hordern: I shall read just one other piece of it.

The Temporary Chairman: I hope that the hon. Gentleman will relate this to the amendment.

Mr. Hordern: I am relating this very closely to the amendment. I think that the Chancellor would also say that it would be most unpatriotic to say—
I do not see a devaluation being delayed beyond the summer of this year."—[Official Report, Standing Committee E; 19th June 1972, c. 1080.]
Those remarks were made by the Chancellor on the Finance Bill in June 1972. It therefore comes very ill when this Chancellor accuses us of lack of patriotism. There was nothing to which he would not descend, no measure to which he would not stop, to present the Opposition in its starkest but most irresponsible terms when he was Shadow Chancellor. We shall accept nothing from this Chancellor, as he is instructed to do his work as the tool of the Staff Federation of the Inland Revenue.

Mr. Peter Rees: It is a great pleasure to follow the speech of my hon. Friend the Member for Horsham and Crawley (Mr. Hordern), whose contribution on this subject has been consistent and honourable.
From the absence of contributions by Government Members, with the honourable exception of the hon. Member for Dudley, West (Dr. Phipps), whose misconceptions have been amply exposed by others of my hon. Friends, it would be tempting to infer that this is a bipartisan debate. I regret to have to say, however, that the Division lists will show that Government Members are too craven to intervene and will hide behind the bland geniality of the Chief Secretary.
It is a little difficult to debate this question seriously with the Chief Secretary, because I suspect that he has deliberately


disencumbered himself of serious advice from the Law Officers and will project himself as the Sancho Panza to the Chancellor's Don Quixote.
The Chief Secretary has a particular knack of indicating by a nod and a wink that in the days of his private practice he, too, was a little familiar with fiscal impropriety; he is not one of the sea-green incorruptibles like the Financial Secretary. However, on this occasion we shall expect a little more from him. We shall expect him to tell us in some detail and with some care what exactly are the pretexts for the whole odious apparatus contained in Schedule 6 and how much evasion the Inland Revenue has detected over the past few years. Every parliamentary Question so far has failed to elicit from the Government even a rough estimate of how much tax has been lost by evasion.
We shall want from the Chief Secretary information about cases that can be covered by Schedule 6 but cannot be covered by the precise powers that the Inland Revenue has at the moment.
I suspect that the real basis for Schedule 6 is a vague unease on the Government Benches. The Left wing is always ready to play on the lacerated conscience of the Home Secretary about police powers. The Left wing is ever ready to press for the release of the Shrewsbury pickets and Mr. Jeff Davies, but when it comes to questions of taxation it bays for the blood of the property classes.
Others of my hon. Friends have exposed the misconceptions in the attitudes of the Left wing. For every one business man that the Chief Secretary produces with two sets of accounts I will produce two—what is the phrase?; I appeal to my hon. Friend the Member for Cirencester and Tewkesbury (Mr. Ridley)—" ordinary working people" who have two jobs, one of which is assessed under Schedule E and one of which escapes the tax gatherers' net.
I have heard it said that there are trade union officials who receive—I believe the phrase is "backhanders". How many of those trade union officials have been returning those backhanders to the Inland Revenue? Perhaps they, too, will be vulnerable to the attention of the Revenue authorities. Will that please Mr. Plant?
In my experience—I believe that this echoes the feeling of my hon. Friend the Member for Cirencester and Tewkesbury—the country at large recognises a basic distinction between crime—I will extend that to cheating the social security people—and the evasion of tax.
Unless the distinction to which I have referred is recognised by Government Members it may lead them to courses that, politically, they will ultimately regret. I am not concerned here to justify the definition; I merely point it out. I believe that ordinary people recognise that distinction, because at the end of the day under the taxation system the State is taking what they have earned and saved. At present there is a deep revulsion and a feeling that in almost every enterprise that they undertake the State is now their senior partner.
If Government Members have not recognised this point of view, I would only draw their attention to what is happening in Sweden. They may remark the impact on the Swedish social conscience of the departure of Mr. Ingmar Bergman. They may remark how Mr. Palme's status in that country has been affected by the treatment of Miss Bibi Anderson, or Mrs. Lindgren. I instance Sweden only because there is the pattern for so many of the political aspirations and achievements of Labour Members, and therefore they may recognise that in a democracy constructed on lines that they hope will soon obtain in this country there is a limit beyond which one cannot press the taxpayer.
It is right that we should examine the existing position. The Committee should ask itself whether the administration in this field is defective. We have an extremely able and gifted inquiry branch. It should be recognised frankly that its methods are not always impeccable. Its methods even now are often open to criticism. Before the Chief Secretary considers enlarging the powers at its disposal I suggest to him and the Committee that he might institute an independent inquiry into its activities.
Over the years I have asked a series of questions about the number of assessments with which the inquiry branch is concerned, going back not just beyond 1959 but way back beyond 1955. I believe that if the country realised that


there are people at this moment who are being asked to account for what they may have earned and what profits they may have generated 20 or 30 years ago, the feeling would be that enough is enough.
If the administrative machinery is adequate, is there some defect in the law? As other of my hon. Friends have said, in cases where assessments are in time, where they relate to matters within the past six years, the onus is on the taxpayer to displace those assessments. This is in stark contrast to the criminal law. It is the taxpayer who has to rebut what is raised against him; it is not for the Revenue to justify the assessments that it raises.
If an assessment is raised out of time, it is for the Revenue to justify fraud or neglect, but having done so—and in my limited professional experience it is relatively easy if one looks back over the years at a complex set of accounts to find some small matter where the taxpayer may have slipped up—the onus of displacing the assessment shifts to the taxpayer. I say that even at this present time the law is solidly weighted in favour of the Inland Revenue.
So far we have heard nothing about this from the Labour Back Benches, but perhaps we shall hear from the Chief Secretary in reply. The Inland Revenue is already equipped with two powerful sections. I mention them specifically because I very much hope that the Chief Secretary will give us his view on them. I refer to Sections 51 and 52 of the Taxes Management Act. Under Section 51 the Inland Revenue has the right, through a body of commissioners, to require the production of documents relevant to a case. Under Section 52 the Revenue has the right, with very limited protection to the taxpayer to exclude his professional advisers, to require the attendance of almost any witness who may, in its consideration or in that of a body of commissioners, be able to give relevant evidence.
Why, against that background, do we have to have Schedule 6 fastened on our necks? What particular cases has the Chief Secretary in mind that are not covered by Sections 51 and 52? Is it that he wants the Revenue to be able to rummage through a wife's housekeeping

accounts? Does he want children to be brought to court to produce their savings books? Is that the kind of case that has brought him here to introduce Schedule 6?
What about professional advisers? The protection there is illusory, for two reasons. First, if a professional adviser is found at any time to have been guilty of however small an element of fiscal impropriety, even impropriety quite unconnected with the affairs of the taxpayer in question, professional privilege is immediately removed from him. Again, this particularly odious measure enables the Revenue, with a warrant from a justice of the peace, to break into the house of an individual, or professional or business premises. There is no professional privilege there.
If any example were needed of the illusory nature of the protection afforded by a body of justices of the peace, it was the speech of the hon. Member for Dudley, West who not only showed that he has not appreciated the basis of these provisions, but demonstrated how readily he would be prepared to grant such a warrant to a member of the Inland Revenue.
6.45 p.m.
It may come as a surprise to some hon. Members to know that in advance of the decision of this House the Revenue has started to set up a series of offices called, with bureaucratic understatement, "special offices". That has a flavour not of Russia but of 1984. Let me tell the Committee—because the answer that I received to my Question may have escaped the attention of hon. Members —that the Financial Secretary said:
These offices will handle work of special complexity from existing tax offices, including major cases of avoidance and evasion.
Now we start to see that there will be a blurring of distinction between avoidance and evasion.—
One office of 17 staff has been set up in Edinburgh."—
I am sorry that the hon. Member for Perth and East Perthshire (Mr. Crawford) is not here to know that there is a certain partiality—

Mr. Ridley: That is the first good argument that we have heard for devolution.

Mr. Rees: I am obliged to my hon. Friend, but it could just be that the electoral tremors north of the border led the Treasury Bench to decide that in these matters a little more attention should be given to the Scottish nation—that their tax affairs should be demonstrably on a clearer, cleaner basis than are those of us corrupt people south of the border.
One office of 17 staff has been set up in Edinburgh and two more of about the same size will be set up on 7th June in London and Manchester.
This will be the new public holiday. It will be not Labour Day, but Revenue Day.
Most of the staff for these three offices have been found from existing staff:
—this will be bad news co Mr. Plant, who no doubt envisages that the number of members in his federation will be doubled—
the total additional cost is about £30,000 per annum 
—that I beg leave to doubt, for reasons that I shall deploy.
Other offices will be set up as experience suggests.
There we have it. The experience generated by Schedule 6, unless we can emasculate it in Committee, will no doubt suggest to the Treasury Bench that every major county centre should have its special office dedicated to routing out avoidance and evasion. The Financial Secretary went on blandly to say:
The authority lies in the Boards statutory responsibility for the care and management of the taxes."—[Official Report, 11th May 1976; Vol. 911, c. 128.]
I am surprised he did not say "in their dedication to protect the interests of ordinary taxpayers".
I am sceptical about the figure of £30,000, and I take up the point made by my hon. Friend the Member for Horsham and Crawley. The accusation has been levelled at these Benches over past weeks and months that we are not specific in what we would like to see cut out of Government expenditure. I shall now give the biggest hostage to fortune, and the Front Bench on my side can disown me if it likes.
If the Committee refers to the public expenditure White Paper, which we debated with so much vehemence a matter of months ago—I am sorry that there are not present Back Benchers to inflict on the

Government the sort of salutary lesson that they were able to do, with our assistance, on a previous occasion—it will see in Table 13, on page 104, under the heading "Other Public Services" a projection of expenditure between 1970 and 1979–80.
Even the most blurred eye will see that the cost of tax and rate collection rose from 1970, when even then it cost £327 million to £363 million in the last years of Lord Barber—and creditable though his efforts were I must draw that to his attention—and will rise to the quite staggering figure of £477 million in 1979–80. If I were challenged by the Chancellor of the Exchequer or the Chief Secretary to say where I see scope for cuts in Government expenditure, I would say that I see it in the cost of tax and rate collection. Against that background, I doubt very much whether these special offices will cost only £30,000 a year in five years' time, and I also take leave to doubt whether they will bring in very much tax.
Beyond that, it is right to remind the Committee that in a tax case, at least until it reaches the High Court, the special and general commissioners have no power to award costs against either the taxpayer or the Revenue. However innocent the taxpayer, once he is in the hands of the inquiry branch—and I have no doubt the techniques of the special offices will be the same—he is immediately set on a long, agonising and extremely expensive inquiry. Even if at the end of the day he is cleared by the general or special commissioners, he has no way of recouping his expenses from the Revenue.
If the Chief Secretary is really serious in his concern for the ordinary taxpayers, I suggest that he should deal specifically with this point. There should be some measure by which the taxpayer can be compensated if he is cleared of a fiscal impropriety after a prolonged inquiry.
What we are being asked to do today and in Committee upstairs is to erect a massive prying inquisitorial superstructure to reassure the Chancellor and his Ministers, to get into their minds, Chinese or occidental, tiny or capacious, that the last drop of blood has been extracted from the taxpayers of this country.
No doubt those who set up and operated the Spanish Inquisition did so


with the highest motives. No doubt their only concern as they fastened the thumbscrews was for the souls of those they were consigning to eternity. I accept that the Chancellor and the Chief Secretary are acting with lofty and disinterested motives, but there will be a deep feeling of revulsion from the whole tax-gathering machine when the country realises what is being inflicted on it in its name. Any confidence between the taxpayers and the Revenue will be rapidly dissipated and costs of tax collection increased as a result of these measures.
Long after his other efforts are swept away by the economic gale he has raised, the Chancellor will be remembered by his Friends below the Gangway as the poor man's Stalin, and by the rest of the country as the fiscal Torquemada.

Mr. George Younger: The Chief Secretary is fighting a lone battle today. There is no one to support him on his Benches, and no Law Officer, either Scottish or English, to give him advice. Throughout the debate there has been a marked absence of hon. Members on the Government Benches, and it seems that the Labour Party is too embarrassed to give any support to the Chief Secretary.
This Committee today has responsibilities to the electors which it is extremely important should be discharged properly. We must bring home to the public the fact, that, despite what is said in this debate, this clause and the schedule mean just one thing. From the time that the Bill is passed, it will be possible for any citizen of this country, rich or poor, and no matter where he lives, to find, without warning, that a tax inspector can appear at his house, demand entry, and demand to search it, whether or not the owner is present. He can do this even if the house is occupied only by children, or the man's wife. The snooper is able to come into any home in this country. That is what hon. Members opposite will be voting for if they pass this clause tonight.

Mr. George Cunningham: We have that now.

Mr. Younger: As the hon. Gentleman says from a sitting position, we have that now. I agree. There has to be

some infringement of personal liberty in any democracy, but up to now it has been confined to matters in which serious or criminal offences are involved. The point is that every ordinary citizen who has to fill in a tax return, or who is liable to PAYE, will be threatened by a visitation. Everyone will find himself or herself liable to this if the Government have their way tonight. The Committee must bring home to people the fact that it is not just a question of a business man finding an inspector on his door if the Inland Revenue cannot get the information from the business records. Perhaps it is acceptable to some extent for a business man to be visited, and investigated at his home in certain circumstances, because a business is not a private affair; it has a public interest. But when a private home and a family can be broken into by tax inspectors this is a major departure—in principle and degree—from anything we have had until now.
The Chief Secretary has to give us the reasons. He must say in precisely what circumstances these powers will be necessary to provide information that there is no other way of getting. We will have to say in what precise circumstances entry into a private home under warrant will be the only way of getting tax that is thought to be due. It has to be something that cannot be done in any other way, because the Inland Revenue already has powerful sanctions. As has already been pointed out, it has the sanction of putting a very high assessment on someone in order to put the onus on him to disprove it.
I hope that the Chief Secretary will be prepared to consider changing the details proposed in Schedule 6 in Committee upstairs. If these details are to be sacrosanct and resisted at every step by the Government, this will be a very serious and wrong attitude on their part. The Chief Secretary must be prepared to produce safeguards for property that has been taken without proper records being taken of it. He must be prepared to cover the point of damages, and accept admendments on the obligation of wives or children alone to refuse entry because the master of the house, whose affairs are primarily being investigated, is not present. If private homes are to be invaded, there must be changes in the details. I hope that when he replies the Chief Secretary will bear in mind that while very


few people in this country will have any time for those who deliberately avoid paying tax, very, very few will have any time for a Government who produce new Regulations to allow inspectors to go into private houses and snoop on people's private affairs and private possessions The Government are doing something very different from anything that we have had hitherto. It is a difference of degree, which people will not accept.

[Sir MYER GALPERN in the Chair]

7 p.m.

Mr. Nigel Lawson: I wish to make only two points and I shall try to do that very briefly. First I should like to draw the attention of the Committee to the Inland Revenue Management Review which took place a couple of years ago, and the proposals by the Review Committee for the structure of the Department which were published in January last year. A radical restructuring was proposed and a number of reasons were given in the review for that. The review was signed by a number of eminent people of whom the most eminent was the Chairman of the Board of Inland Revenue, Sir Norman Price. The document says:
The Committee share the views expressed to them by many with the Department that the task of countering avoidance and evasion is being tackled with less intensity than all would wish.
It goes on:
The Committee hope that the proposal to employ more management officers would make it possible to set up special units of fully trained Inspectors to undertake counter-avoidance and evasion work.
It is this linking together of avoidance and evasion which makes some of us feel that the clause is even more sinister than it might appear.
My second point is in the form of a question to the Chief Secretary. Its relevance may be lost on him but it will not be lost on other hon. Members or still less on members of the public. The former Minister of State at the Home Office said last month in an answer in this House:
It is really a question of control inside the country. There are things that some countries do about internal surveillance of people living in their territory, but I suspect that the great majority of Members of the House would resist any such incursions into the freedom of individuals living in this country. That is the weakness of our immigration control.—[{Official Report, 8th April 1976; Vol. 909, c. 623.]

Perhaps it is, but my question is this: why is there this very high Government sensitivity about individual freedom when the question at issue is immigration control dodgers, but no such sensitivity when the question at issue is tax dodgers?

Mr. Joel Barnett: This has been an interesting debate. I have been asked a lot of questions, the principal one of which was why we need these powers. I shall try to ignore some of the exaggerated statements that have been made about how these powers will be used. I must entirely disagree with the hon. Member for Ayr (Mr. Younger), who said that such powers are not otherwise available. They are available in another area.
I am glad that we all agree that in an efficient system of collection of tax dishonesty is unacceptable but that we should always be careful to balance any such system with a care not to go too far into the infringement of personal liberty. I have never disagreed with the basic policy of trying to get a balance into these matters, and I said so when we debated them on Second Reading.
The powers are needed, as I am sure all hon. Members will be aware, to assure all taxpayers that they are not suffering because of a tiny dishonest minority. The weakness of the present powers is that, in effect—I took note of all the emotive language that hon. Members have used about snoopers, and the rest—they create a tax evaders' charter, because under the present system it is easy for a dishonest taxpayer, in certain circumstances, to evade his tax.
I want to come to the point made by a number of hon. Members that power is available to an inspector of taxes to raise an estimated assessment that is very likely to be far in excess of what might otherwise be the tax liability. Such a power is certainly available. Where such an assessment is raised it is for the taxpayer to disprove that assessment. The difficulty is that without the power we are seeking the taxpayer can submit a set of accounts—either by failing to give his accountant full information or by submitting the figures himself—which it is not possible for an inspector to dispute. He is not in a position to do so, since he cannot go behind the figures to see whether information has been omitted.
There is also, of course, scope for enormous delay and scope to make these


estimated assessments ineffective by the withholding of documents or their destruction, when under these powers those documents would be available. In our present system if an inspector of taxes has no positive reason to be dissatisfied with the return or the set of accounts he has no power to check the basic documents. That is why we have powers under Section 20 that documents should be made available. I would have thought that the making available of documents by a taxpayer to back up his account was not in itself a serious infringement of personal liberty.
I am coming to the major point that every hon. Member has referred to, namely the powers of search and entry.

Mr. Peter Rees: Before the Chief Secretary leaves the question of documents, will he say whether the inspector will ask for all the underlying documents from which the accounts are constructed, even though he does not have serious grounds for believing that fraud has been committed? If that is so, what is the advantage of this provision over Section 51 of the Taxes Management Act 1970?

Mr. Barnett: In the normal course of events inspectors will accept a trader's accounts as submitted by his accountant. The hon. and learned Gentleman knows that that has always been the case and will continue to be so. There will normally he no need to go behind a set of accounts signed by a reputable accountant.
The hon. Member for Down, South (Mr. Powell) and the hon. Member for Ayr asked me to answer the straight question why precisely the Inland Revenue needs the powers of search and entry in the case of suspected evasion of tax. I was asked to be precise about the areas that we are talking about. The right hon. Member knows that by the very nature of things we cannot be precise about tax evasion. One does not know with any precision where the tax evasion is and the extent of it until one has these powers. I accept that that means that we have to be paricularly careful about giving the powers and the safeguards allied to them. The safeguards are crucial to the powers.

Mr. Powell: If that is the right hon. Gentleman's answer to my question, how

can he defend the assertion that these powers will be used in only a handful of cases, since he has declared that he cannot define the circumstances in which they will be used and that they are only a matter for exploration?

Mr. Barnett: There cannot be a random search because of the safeguard that before there can be a search a warrant must be issued by a justice of the peace.

Mr. John Loveridge: The Chief Secretary says that a random search will not be possible because it will be necessary to get a warrant from a justice of the peace. I have been a justice of the peace and I know as well as the Chief Secretary does that when an official brings something of such a technical nature as this before him the justice is obliged to accept the complete good faith of the official. He is not competent to examine the case being put before him. Therefore there is no protection against the random search.

Mr. Barnett: I was coming precisely to the point of the safeguard of justices of the peace, but I should like to pursue the argument a little further in respect of how the powers will be used. The hon. Member for Cirencester and Tewkesbury (Mr. Ridley), in a customarily witty speech, really gave the answer. With the benefit of his vivid imagination he gave the example of an inspector of taxes knocking on the door of a prostitute in the middle of the night and interrupting whatever she might be doing at that time, to ask for her books and records. The hon. Gentleman said that these powers are not suitable for this type of case. He is absolutely right. I assure him that it is extremey unlikely, to say the least, that they would be used in that type of case.

Mr. Ridley: If the VAT inspection teams are anything to go by, there may be seven men calling.

Mr. Barnett: It may even be seven ladies calling. I was going to say something in passing about the VAT powers, because these are directly covered by the clause.

Mr. William Clark: The Chief Secretary said that when the inspector issues an excessive assessment it is up to the taxpayer to put in some accounts.


If he puts in accounts the Chief Secretary said the Revenue had no alternative but to accept them. Why then should the Revenue search his premises? If it is still dissatisfied with the accounts that have been submitted, surely it can ask for capital statements, yearly rests, and if the taxpayer refuses to give them the inspector can go before the commissioners and obtain the power to go to the bank accounts, and so forth. The Chief Secretary is not misleading the House, but he is rather over-simplifying the position, because if the Revenue has to accept accounts there is no point in search.

Mr. Barnett: With great respect to the hon. Gentleman, I know that, as a member of my own profession, he will be aware of what happens in the case of capital statements. Before one gets to the submission of capital statements, many months and often years have gone by, and documents have either been mislaid or positively destroyed. The hon. Gentleman knows that that happens and that, before a back duty investigation is completed, in most cases years go by. He knows that is the case.
I am sorry to see the hon. Member for Croydon South (Mr. Clark) shaking his head in disagreement, because if he does not know that, his experience is somewhat different from my own.

Mr. William Clark: It may be that the Chief Secretary's experience may be very much different from mine: I am delighted about that. What I am trying to say is that if the taxpayer has made a gain or profit in cash, and has salted the cash away somewhere, it will be reflected in the assets in the name of that taxpayer.

Mr. Barnett: I do not know that the hon. Gentleman has added to the point that he was seeking to make. I do not know if what he is saying in any way detracts from the need for the Revenue to have real powers in order to ensure that the dishonest taxpayer should pay his full share of tax.

Mr. John Nott (St. Ives): The Chief Secretary knows well that there are positively hundreds of back duty investigations outstanding, some of them stretching back for eight to 10 years. The Chief Secretary himself mentioned back

duty investigations. Is it suggested that, when these have been outstanding for a long time, powers of entry and search will be appropriate in order to bring those back duty investigations to a conclusion?

7.15 p.m.

Mr. Barnett: With respect, I did not say that. Perhaps the hon. Gentleman did not appreciate that I used the words "back duty investigation" because they were used by his hon. Friend. He talked about capital statements and capital rests; that is what comes out of back duty investigations. Certainly, I am not suggesting that this will be the sort of case in which powers of search and entry will be used. As we have said on many occasions, the powers will be used in only a handful of cases. I am certainly not talking about all these capital statements.
I assure hon. Gentlemen of one thing —that there will be no question of random searches of the kind they so rightly fear. An inspector of taxes will not be able to swear an oath that in his view, and his view alone, there is a suspicion of fraud; he will have to get a clearance from the board at Somerset House. I am prepared to consider amendments to write that into the Bill on Report. Certainly there will be no question of these powers being exceeded.
Let me come immediately to the most important factor—the question of safeguards. I readily concede that, when one is giving these powers to the Inland Revenue, safeguards are absolutely essential. The new Section 20B(1) contains the statement:
If a justice of the peace (or, in Scotland, a justice of the peace, a magistrate or a sheriff) is satisfied on information on oath given by an officer of the Board that there is reasonable ground for suspecting that an offence involving any form of fraud in connection with, or in relation to, tax has been or is being committed on any premises, or that evidence of the commission of such an offence is to be found there".
As I understand it, the commission of fraud is a criminal offence in the normal sense of the word. First of all, we have the safeguard that information has to be given on oath by an inspector of taxes. I do not take that lightly. I do not believe inspectors of taxes, any more than any other citizen, will falsely swear on oath. I do not believe that for a


moment, nor do I believe any hon. Member on the Opposition Benches believes that.
A further safeguard is that there have to be "reasonable" grounds for suspecting, not just minor grounds. I believe these are powerful safeguards. Justices of the peace are our traditional safeguard in this country, despite what the hon. Gentleman said, where there is a suspicion of a criminal offence. This applies in about 50 other cases. It is quite wrong to suggest that justices of the peace would take these matters lightly. One does not need great knowledge of the law on the part of either justices of the peace or anybody else. If an inspector of taxes swears on oath that in his view there is at least a suspicion on reasonable grounds that a fraud, a criminal offence, has been committed, I do not believe that these are inadequate safeguards.
I believe that justices of the peace arc the proper authority for the issue of search warrants, and that if we did not follow that practice here it would be taken as a criticism of the way in which these matters are at present handled and would be a serious slur on the justices."—[Official Report, Standing Committee E, 12th June 1972; c. 816.]
Let me make it quite clear that the words I have uttered are not my words—they were the words of the Financial Secretary in 1972 when asking the Committee to support identical measures for VAT.
The hon. Gentleman asked me what I said. The fact is that we did not like VAT, nor the measures introduced with it, but I am prepared to concede that in the years since the introduction of these powers they have been found to be necessary and effective.

Mr. Hordern: As the right hon. Gentleman knows, he opposed those powers at the time as I opposed them. However, the point that he makes is the point about justices of the peace. He says that this case is on all fours with the references normally made to justices in cases of fraud. But surely the distinction here is that when an inspector goes to a justice of the peace he has to satisfy him on reasonable grounds that a fraud has taken place. But how is the justice to know that those grounds are reasonable, given the state of his knowledge of the tax law?

Mr. Barnett: I know that the hon. Gentleman was one of his party who

opposed his own Government over those powers. But if I may be allowed to continue the argument about the powers and the safeguards, I noted with great care what the right hon. and learned Member for Surrey, East (Sir G. Howe) said about the identical powers which were taken by a Conservative Government when he was one of the Law Officers. He said that he would recognise that there was a need for a review of those powers now but went on to say that he would not go along with those—no doubt he meant his hon. Friends—who would seek to remove the powers in respect of VAT.
I was glad to hear him say that and I should like to hear from him whether, when we have adequate safeguards—as I believe we shall have when the Bill is on the statute book—he will seek to remove these powers to ensure that dishonest taxpayers who have been committing criminal offences are caunght whenever possible. I gather that he will not tell us whether that will be the case.
I deplore as much as anyone who has spoken in this debate the heavy-handed abuse of authority, whether in this respect or in any other. That is why I and the Chancellor are prepared to consider additional safeguards to make sure that there is no abuse of power. What I want to make clear on the VAT powers is that the publicity has been in a tiny minority of cases—about 10—and that all those cases have been fully investigated. There is no justification for the allegations except in two relatively minor cases. In very few cases have searches failed to lead to evidence of VAT offences. Almost invariably, they lead to the ascertainment of offences.
However, I recognise the concern of hon. Members, including my hon. Friend the Member for Dudley, West (Dr. Phipps) and others of my hon. Friends who are concerned about the safeguards. I hope that the hon. Member for Gloucestershire, South (Mr. Cope), who suggested that one safeguard might be a Minister's signature on the warrant, will on reflection recognise that that would hardly be satisfactory, given that a Minister should not have the detailed information of a personal taxpayer's case.

Mr. Cope: I was suggesting that the Minister's signature should be not on the warrant but on the information.

Mr. Barnett: With respect, a Minister could do that only if he had the details of the personal taxpayer's case. It has always been a tradition that they should not be available to a Minister and we shall continue that situation.

Sir G. Howe: I want to take the Chief Secretary back to the remarks he just made about the VAT powers as used and would refer in particular to the case of Mr. Button of Gravesend, the facts of which are set out in parliamentary reports. In that case, seven or eight officials were present at the taxpayer's home for eight hours and extended their search to many articles of a private nature, including a child's satchel. Is that regarded as a routine inquiry up with which the taxpayer may have to put, or is it something in respect of which the right hon. Gentleman is prepared to say the officials went beyond their powers? An answer is important to enable us to judge these provisions.

Mr. Barnett: The right hon. and learned Gentleman will have more knowledge than I of how search warrants are used, not only in tax cases. But I cannot comment on detailed cases. That would be quite wrong. However, where any case is brought to our attention which even remotely appears to be an abuse of authority, that case will be fully investigated. I can give that complete assurance.

Mr. Peter Rees: Would the right hon. Gentleman consider the precedent set by the Home Secretary and institute an independent appeals procedure to look into abuses of power by the Inland Revenue? There seems to be a fair analogy between the police and the Inland Revenue. That might allay the concern of taxpayers.

Mr. Barnett: rose—

Several Hon. Members: rose—

Mr. Barnett: Before I give way to anyone else—no one can accuse me, I hope, of being discourteous—perhaps I could continue to indicate where I am seeking, by what I think is a better means than the hon. and learned Member has just suggested, to improve the safeguards so that we have proper checks and balances to prevent abuse of power by officials.
I have had discussion with the Home Secretary and the Lord Chancellor with a view to seeing whether one can substitute some other person for a magistrate from whom an inspector of taxes would be able to obtain a search warrant. The right hon. and learned Member for Surrey, East suggested on Second Reading the substitution of a High Court judge. I am sure that he is aware that it is contrary to precedent for a High Court judge to be placed in this situation. What is more, it would be extremely inconvenient, to say the least, if, in the case of a serious fraud, an inspector of taxes had to go to a High Court judge—[HON. MEMBERS: "Why?"] I hope that hon. Members will just wait a minute.
Nevertheless, I recognise that there is a serious case for extending the safeguard. I am not suggesting, however, as some hon. Members have, that the justices of the peace would not be perfectly capable of doing this job. What I suggest, following my discussions with the Lord Chancellor and the Home Secretary, is that we use a circuit judge. I hope that no one will suggest that that would be inadequate for the purpose. I gather that there are about 250 of them in England and Wales, which will make it much more convenient. This will also, I hope, strengthen the safeguard that an inspector of taxes would need to obtain that search warrant by providing the necessary information on oath before a circuit judge.

Several hon. Members: rose—

Mr. Barnett: I am not finished yet. I must ask hon. Members to contain themselves.
I hope that that will provide greater accessibility, as well as a substantial safeguard. I understand that in Scotland—I say this with some hesitation because other hon. Members are more knowledgeable on the matter than I—a sheriff might be considered the equivalent of a circuit judge. I am glad to see the hon. Member for Ayr nodding assent.
In Northern Ireland, I gather that a county court judge would be something like the equivalent. We would hope to make both those substitutions, and I hope that that would be a substantial additional safeguard.
If serious propositions are put to us in Committee for extending the safeguards on some of the more serious points made in this debate, we shall of course consider them.
Following this debate and some of the things said in it, I hope that it will not be considered that moving from the traditional person who provides the warrant, namely the magistrate, will be in any way a reflection on the way in which the existing powers are used by justices. Nor do the special cases that we are talking about—the extension of the powers of officials—in any way reflect upon the competence and responsibility of magistrates in the performance of their duties.
I hope that the Committee will feel that I have gone a long way to meet the serious points made. I emphasise again that the powers in Schedule 6 will be needed in an infrequent number of cases only, where serious fraud is suspected and evidence is likely to be destroyed. They would be used for the purpose of countering criminal tax evasion. That is what we are talking about.

7.30 p.m.

Mr. Loveridge: I appreciate the efforts which the Chief Secretary has made to satisfy the doubts I voiced earlier about the safeguards. I hope, however, whoever signs the warrant, that the inspector will have to provide the full background, documentation and details of the allegation so that the person signing the warrant can be in possession of as much technical knowledge as possible to enable him to interpret what he is signing and that he will not merely sign on the say-so of an inspector, however honourable he may be.

Mr. Barnett: When the hon. Gentleman thinks about what he has said, he will realise that he is being a little insulting to circuit judges. I hope he will recognise that circuit judges are not likely to give a warrant just on the say-so of an inspector of taxes, although inspectors of taxes are very responsible people, as anyone who has had dealings with them will know. In addition, the inspector of taxes will not ask for a search warrant without first having cleared it with the Board of Inland Revenue. These are substantial safeguards.

Mr. John Gorst: In moving from magistrates to county court judges, the Chief Secretary has made an important concession. If one magistrate refused to give a search warrant, the Inland Revenue official might tout around to get another magistrate to sign. I ask the Chief Secretary to ensure that the county court judge is told if another county court judge has already turned down an application.

Mr. Barnett: I was talking about circuit judges in England and Wales, not county court judges. I find it hard to believe—I am not a lawyer and do not know how these things work—that if an inspector of taxes went to a circuit judge for a search warrant and it was refused, the inspector would tout around other circuit judges. I doubt whether any lawyer in the House would imagine that would happen.
I hope that those who read our debates and those who have listened to what has been said here and elsewhere will recognise that the fears that have been expressed about these powers are grossly exaggerated. The need for the powers is, I hope, evident to all. It is certainly evident to honest taxpayers who ask only that dishonest taxpayers who are committing criminal offences are brought to justice and required to pay the proper tax. I ask my hon. and right hon. Friends to support the clause.

Mr. David Howell: The Chief Secretary tells the Committee that he is not a lawyer and does not know how these things work. It is nothing short of disgraceful, when we are dealing with a matter which involves a further major incursion into the liberty and privacy of the subject—all are agreed on that, whether, like the Chief Secretary they believe it is necessary or, like the Opposition, utterly unnecessary—that a Law Officer has not bothered to show his nose during the debate. That registers, along with the Chief Secretary's engaging candour about ignorance of the law and how these things work, just what attitude the Government take. We realise that the Chancellor cannot be here, but it is extraordinary that we have not had the benefit of the advice or even the attendance of a Law Officer during this debate.
We are moving into an entirely new area. We are moving into the home, into personal taxes on income, into capital


transfer tax and, if a wealth tax comes along, no doubt we shall be moving into the use of these powers there.

Mr. Barnett: indicated dissent.

Mr. Howell: The Chief Secretary may shake his head. He has produced no evidence—

Mr. Barnett: If the hon. Gentleman reads the Bill he will find that it does not apply to capital transfer tax.

Mr. Howell: We shall watch the safeguards and reassurances, but so far we have not heard enough to satisfy us.
As for the powers, the right hon. Member for Down, South (Mr. Powell), my hon. Friend the Member for Ayr (Mr. Younger), the hon. Member for Cornwall, North (Mr. Pardoe) and many others repeatedly asked why the new powers were needed for a handful of cases. The phrase "handful of cases" is one of Mr. Cyril Plant's contributions to the debate. We want to know why it is a handful of cases and why the powers are needed when the Inland Revenue already has powers to obtain search warrants in criminal cases.
The Chief Secretary wants to extend that power to non-criminal cases and has not explained why. The phrase used in the Bill is "any form of fraud", and fraud is not necessarily a criminal act. It can also arise under the civil law. The Chief Secretary glossed over that and has not admitted that what is being done extends major new powers into non-criminal cases.

Mr. Barnett: If the hon. Gentleman will read the Bill he will perhaps understand that a fraud on the Revenue is a criminal offence.

Mr. Howell: The phrase used in the Bill is "any form of fraud", and any

form of fraud can apply to civil as well as criminal cases. That is not made clear in the Bill nor has it been made clear by anything the Chief Secretary said.

We agree that there is nothing to be said in defence of those who deliberately defraud the public revenues, and that applies both to major tax manoeuvres of the sinister kind to which the Chief Secretary keeps referring and the moonlighting and other practices by which cash changes hands and is not declared for tax. We have no sympathy with either kind of tax evasion nor with those who insist on seeing these provisions as applying only to a few. According to the hon. Member for Tottenham (Mr. Atkinson) there is £3,000 million to £3,500 million worth of work being done which is not declared for tax purposes. This is a widespread matter which affects many, not just a few.

These powers allow the Inland Revenue with the approval of a magistrate—now perhaps of a circuit judge—to go into the home of an individual and, under Section 20B, the premises or home for his professional advisers when they may not have been accused, may not have been convicted and may not even have been in a position to provide the information required. That is a major new incursion into the liberties and privacies of an individual. It is an attack on legal privilege, an attack on our liberties, an attack not on a handful of cases but on a great many cases. The Opposition, even with the reassuring smokescreen of the safeguards, say that we shall have none of it. We shall have none of the clause and none of the schedule. We reject them, and I urge my hon. and right hon. Friends to oppose the motion.

Question put, That the clause stand part of the Bill:—

The Committee divided: Ayes 198, Noes 185.

Division No. 139.]
AYES
7.40 p.m.


Abse, Leo
Boardman, H.
Cocks, Michael (Bristol S)


Anderson, Donald
Bottomley, Rt Hon Arthur
Cohen, Stanley


Archer, Peter
Boyden, James (Bash Auck)
Coiquhoun, Ms Maureen


Armstrong, Ernest
Bradley, Tom
Concannon, J. D.


Atkins, Ronald (Preston N)
Bray, Dr Jeremy
Conlan, Bernard


Bagier, Gordon A. T.
Brown, Hugh D. (Proven)
Cox, Thomas (Tooting)


Barnett, Guy (Greenwich)
Brown, Robert C. (Newcastle W)
Craigen, J. M. (Maryhill)


Barnett, Rt Hon Joel (Heywood)
Brown, Ronald (Hackney S)
Crawshaw, Richard


Bates, Alf
Buchan, Norman
Cronin, John


Bean, R. E.
Buchanan, Richard
Cunningham, G. (Islington S)


Bennett, Andrew (Stockport N)
Campbell, Ian
Cunningham, Dr J. (Whiteh)


Bidwell, Sydney
Canavan, Dennis
Davidson, Arthur


Bishop, E. S.
Carmichael, Neil
Davies, Bryan (Enfield N)


Blenkinsop, Arthur
Clemitson, Ivor
Davies, Denzil (LlanelN)




Deakins, Eric
Latham, Arthur (Paddington)
Rooker, J. W.


Dean, Joseph (Leeds West)
Lewis, Arthur (Newham N)
Roper, John


de Freitas, Rt Hon Sir Geoffrey
Lewis, Ron (Carlisle)
Rose, Paul B.


Dempsey, James
Lipton, Marcus
Ross, Rt Hon W. (Kilmarnock)


Doig, Peter
Litterick, Tom
Rowlands, Ted


Dormand, J. D.
Loyden, Eddie
Sandelson, Neville


Duffy, A. E. P.
Luard, Evan
Sedgemore, Brian


Eadie, Alex
McCartney, Hugh
Shaw, Arnold (Ilford South)


Edge, Geoff
McElhone, Frank
Sheldon, Robert (Ashton-u-Lyne)


Edwards, Robert (Wolv SE)
Macfarquhar, Roderick
Short, Rt Hon E. (Newcastle C)


Ellis, John (Brigg &amp; Scun)
McGuire, Michael (Ince)
Sillars, James


Ellis, Tom (Wrexham)
Mackenzie, Gregor
Silverman, Julius


Ennals, David
Mackintosh, John P.
Small, William


Evans, Fred (Caerphilly)
McMillan, Tom (Glasgow C)
Smith, John (N Lanarkshire)


Evans, loan (Aberdare)
McNamara, Kevin
Snape, Peter


Ewing, Harry (Stirling)
Madden, Max
Spearing, Nigel


Faulds, Andrew
Magee, Bryan
Spriggs, Leslie


Fernyhough, Rt Hon E.
Mellalieu, J. P. W.
Stallard, A. W.


Fletcher, Raymond (Ilkeston)
Marquand, David
Stoddart, David


Fletcher, Ted (Darlington)
Marshall, Dr Edmund (Goole)
Stott, Roger


Foot, Rt Hon Michael
Mason, Rt Hon Roy
Strang, Gavin


Ford, Ben
Maynard Miss Joan
Taylor, Mrs Ann (Bolton W)


Forrester, John
Mellish, Rt Hon Robert
Thomas, Jeffrey (Abertillery)


Fraser, John (Lambeth, N'w'd)
Mendelson, John
Thomas, Ron (Bristol NW)


George, Bruce
Miller, Dr M. S. (E Kilbride)
Thorne, Stan (Preston South)


Gilbert, Dr John
Miller, Mrs Millie (Ilford N)
Tierney. Sydney


Ginsburg, David
Mitchell, R. C. (Soton, ltchen)
Tinn, James


Golding, John
Molloy, William
Tomney, Frank


Gould, Bryan
Morris, Charles R. (Openshaw)
Torney, Tom


Graham, Ted
Moyle, Roland
Wainwright, Edwin (Dearne V)


Grocott, Bruce
Noble, Mike
Walden, Brian (B'ham, L'dyw'd)


Hamilton, James (Bothwell)
Ogden, Eric
Walker, Harold (Doncaster)


Harper, Joseph
O'Halloran, Michael
Walker, Terry (Kingswood)


Harrison, Walter (Wakefield)
Orbach, Maurice
Ward, Michael


Hart, Rt Hon Judith
Orme, Rt Hon Stanley
Watkins, David


Hatton, Frank
Ovenden, John
Weitzman, David


Heffer, Eric S.
Padley, Walter
White, Frank R. (Bury)


Horam, John
Palmer, Arthur
White, James (Pollok)


Howell, Rt Hon Denis
Park, George
whitlock, William


Huckfield, Les
Parker, John
Willey, Rt Hon Frederick


Hughes, Rt Hon C. (Anglesey)
Parry, Robert
Williams, Alan (Swansea W)


Hughes, Robert (Aberdeen N)
Pavitt, Laurie
Williams, Sir Thomas


Irvine, Rt Hon Sir A. (Edge Hill)
Perry, Ernest
Wilson, Alexander (Hamilton)


Irving, Rt Hon S. (Dartford)
Phipps, Dr Colin
Wilson, Rt Hon H. (Huyton)


Jackson, Colin (Brighouse)
Prentice, Rt Hon Reg
Wilson, William (Coventry SE)


Janner, Greville
Prescott, John
Wise, Mrs Audrey


Jay, Rt Hon Douglas
Price, William (Rugby)
Woodall, Alec


Jenkins, Rt Hon Roy (Stechford)
Radice, Giles
Woof, Robert


John, Brynmor
Richardson, Miss Jo
Young, David (Bolton E)


Johnson, James (Hull West)
Roberts, Albert (Normanton)



Jones, Barry (East Flint)
Robertson, John (Paisley)
TELLERS FOR THE AYES:


Judd, Frank
Robinson, Geoffrey
Mr. Tom Pendry and


Kilroy-Silk, Robert
Roderick, Caerwyn
Mr. Donald Coleman.


Lamond, James






NOES


Adley, Robert
Crouch, David
Hall, Sir John


Aitken, Jonathan
Davies, Rt Hon J. (Knutsford)
Hall-Davis, A. G. F.


Alison, Michael
Dean, Paul (N Somerset)
Hamilton, Michael (Salisbury)


Amery, Rt Hon Julian
Dodsworth, Geoffrey
Hampson, Dr. Keith


Arnold, Tom
Drayson, Burnaby
Harvie Anderson, Rt Hon Miss


Atkins, Rt Hon H. (Spelthorne)
Dykes, Hugh
Hawkins, Paul


Banks, Robert
Eden, Rt Hon Sir John
Hayhoe, Barney


Beith, A. J.
Edwards, Nicholas (Pembroke)
Hicks, Robert


Bell, Ronald
Elliott, Sir William
Higgins, Terence L.


Berry, Hon Anthony
Emery, Peter
Holland, Philip


Biffen, John
Fell, Anthony
Hordern, Peter


Body, Richard
Fisher, Sir Nigel
Howe, Rt Hon Sir Geoffrey


Boscawen, Hon Robert
Fletcher, Alex (Edinburgh N)
Howell, David (Guildford)


Brittan, Leon
Fookes, Miss Janet
Hunt, David (Wirral)


Brotherton, Michael
Forman, Nigel
Hunt, John


Brown, Sir Edward (Bath)
Fowler, Norman (Sutton C'f'd]
Hurd, Douglas


Bryan, Sir Paul
Fox, Marcus
Hutchison, Michael Clark


Budgen, Nick
Freud, Clement
Jenkin, Rt Hon P. (Wanst'd &amp; W'df'd)


Bulmer, Esmond
Gardiner, George (Reigate)
Jessel, Toby


Channon, Paul
Gardner, Edward (S Fylde)
Johnson Smith, G. (E Grinstead)


Churchill, W. S.
Glyn, Dr Alan
Johnston, Russell (Inverness)


Clark, Alan (Plymouth, Sutton)
Gorst, John
Kershaw, Anthony


Clark, William (Croydon S)
Gower, Sir Raymond (Barry)
Kilfedder, James


Clarke, Kenneth (Rushcliffe)
Gray, Hamish
Kimball, Marcus


Clegg, Walter
Grieve, Percy
King, Evelyn (South Dorset)


Cockcroft, John
Griffiths, Eldon
King, Tom (Bridgwater)


Cooke, Robert (Bristol W)
Grimond, Rt Hon J.
Kitson, Sir Timothy


Cope, John
Grist, Ian
Knight, Mrs Jill


Crawford, Douglas
Grylls, Michael
Knox, David







Lamont, Norman
Mudd, David
Skeet, T.H.H.


Langford-Holt, Sir John
Nelson, Anthony
Smith, Dudley (Warwick)


Lawrence, Ivan
Newton, Tony
Speed, Keith


Lawson, Nigel
Normanton, Tom
Spicer, Michael (S Worcester)


Le Merchant Spence
Nott, John
Stainton, Keith


Lester, Jim (Beeston)
Osborn, John
Stanbrook, Ivor


Lewis, Kenneth (Rutland)
Page, John (Harrow West)
Steen, Anthony (Wavertree)


Lloyd, Ian
Page, Rt Hon R. Graham (Crosby)
Stewart, Donald (Western Isles)


Loveridge, John
Paisley, Rev Ian
Stradling Thomas, J.


Luce, Richard
Pardoe, John
Tapsell, Peter


McAdden, Sir Stephen
Parkinson, Cecil
Taylor, R. (Croydon NW)


McCusker, H
Penhaligon, David
Taylor, Teddy (Cathcart)


Macfarlane, Neil
Percival, Ian
Temple-Morris, Peter


Macmillan, Rt Hon M. (Farnham)
Peyton, Rt Hon John
Thomas, Rt Hon P. (Hendon S)


Marshall, Michael (Arundel)
Powell, Rt Hon J. Enoch
Thompson, George


Marten, Neil
Prior, Rt Hon James
Tugendhat, Christopher


Mather, Carol
Pym, Rt Hon Francis
Vaughan, Dr Gerard


Maude, Angus
Rathbone, Tim
Wakeham, John


Maudling, Rt Hon Reginald
Rees, Peter (Dover &amp; Deal)
Welder, David (Clitheroe)


Mawby, Ray
Rees-Davies, W. R.
Walker, Rt Hon P. (Worcester)


Maxwell-Hyslop, Robin
Renton, Rt Hon Sir D. (Hunts)
Walters, Dennis


Mayhew, Patrick
Renton, Tim (Mid-Sussex)
Wells, John


Meyer, Sir Anthony
Rhys Williams, Sir Brandon
Whitelaw, Rt Hon William


Miller, Hal (Bromsgrove)
Rippon, Rt Hon Geoffrey
Wiggin, Jerry


Mills, Peter
Roberts, Michael (Cardiff NW)
Wigley, Dafydd


Mitchell, David (Basingstoke)
Roberts, Wyn (Conway)
Wilson, Gordon (Dundee E)


Moate, Roger
Rodgers, Sir John (Sevenoaks)
Winterton, Nicholas


Molyneaux, James
Sainsbury, Tim
Wood, Rt Hon Richard


Monro, Hector
Shelton, William (Streatham)
Young, Sir G. (Ealing, Acton)


Moore, John (Croydon C)
Shepherd, Colin
Younger, Hon George


More, Jasper (Ludlow)
Shersby, Michael



Morgan, Geraint
Silvester, Fred
TELLERS FOR THE NOES:


Morrison, Charles (Devizes)
Sims, Roger
Mr. W. Benyon and


Morrison, Hon Peter (Chester)
Sinclair, Sir George
Mr. John Corrie

Question accordingly agreed to.

Clause 48 ordered to stand part of the Bill.

Clause 52

GENERAL PROVISION CHARGING BENEFITS

The Deputy Chairman (Sir Myer Galpern): The next amendment selected is No. 77, in page 32, line 37, leave out 'directors or'.
With this we are to take the following amendments:

No. 76, in page 32, line 37, leave out from 'employed' to end of line 38.

No. 97, in page 33, line 16, leave out '1977–78' and insert '1979–80'.

Mr. Nott: I think it might be for the convenience of the Committee if we held this debate upon the Question, That the clause stand part of the Bill, since the purpose of having these debates on the Floor is to have a relatively wide debate.

The Deputy Chairman: That is acceptable if it meets the convenience of the Committee.

Question proposed, That the clause stand part of the Bill.

Mr. Nott: We now come to that group of classes which modifies, in some cases codifies, and to a large extent confuses,

a huge area of tax law and practice, part of which is statutory, part of which is non-statutory, concerning benefits in kind. I make it clear that our main debate on all the clauses affected by this Chapter will take place in Standing Committee where we shall have the opportunity and the time to examine each proposal in detail. Tonight, in what has to be a relatively short debate, we shall have to concentrate on general principles and the impact of them upon hundreds of thousands of unwitting, unknowing, unsuspecting citizens who will one day receive their pay slip and find that once again the Government have lowered their living standards by stealth and misrepresentation.
What are the facts in this area of benefits in kind? I hope that people will not be misled into believing that if they are earning less than £100 a week this will not apply to them. If they believe this they are completely deluded. The increase in taxation embodied in this clause, often quite savage in its effects, will almost certainly reduce the living standards of hundreds of thoustands of individuals, many of them those who have already suffered most under Socialist taxation.
Those earning 50 per cent. or less above the national average wage—I am talking of people on £80 and £90 a week —will suffer the highest marginal rates of


increase in the tax they pay under this clause. Once again it will be the middle income groups who will suffer, those whom the Chancellor said, in his Budget speech, he wanted to help. It is they who will be hammered into the ground. I do not know how many travelling salesmen there are in this country but there must be hundreds of thousands of them. There is a whole army in the middle income groups who necessarily use their cars for their work. There are transport drivers, airline employees generally, commuters borrowing small sums of money to fund their season tickets, white collar workers in company health schemes making small contributions to those schemes, men and women earning less than £100 a week, struggling to buy their own homes with the help of their employers, railway employees, people accepting lower salaries than normal to work for charities—and probably in a large number of cases they will be paying extra tax even though they are earning £1,000 a year working for a charity and occupiers of accommodation in universities and teaching colleges: all of whom are brought within the provisions of this clause.
I am sure that the vast majority of these people have not the remotest idea of what is to hit them. All of them, either because this legislation is so badly drafted or because their salaries are £80 to £90 a week plus benefits—because the benefits have to be added into the salary to arrive at the limit of £5,000 a year—will come within this clause unless they are one of the privileged few singled out for special treatment.
Who escapes? Apparently, no longer the miner receiving free coal. I think we shall need some clarification here. There are a number of coalface workers earning more than £100 a week—not a great number, but quite a lot. I imagine that they will now have to pay tax on their free coal. If there are miners living in NCB houses—and I believe there are a few NCB houses left although most have gone to local authorities—they will some times be occuping those houses at less than the economic rent. Such people may find that they have to pay a tax on the benefit of occupying those houses.
The miners working at the coalface earning over £100 a week, or even those

earning around £90 a week, because the benefit is added in as well, will find them selves paying tax for the first time. Apparently, people newly converted to Tory policies, like Mr. Scargill and other trade unions leaders who were excluded from paying tax on benefits in kind, have been brought in this year, along with a number of others, to make it look acceptable.
Who escapes the provisions of the clause? None other than the author of this chapter in the Bill, the Chancellor, the man who chooses to live above the shop at No. 11 Downing Street. Let us not say that that is where the Chancellor works. He does not work there. He works around the corner in Whitehall. Because he drives around in a pool car, because he is what is known as a representative occupier, he will not come within this legislation.
That brings me to the whole concept of the representative occupier. I forget what thy; Chancellor's salary is as a Cabinet Minister, may be £12,000 a year. It is a substantial salary. The right hon. Gentleman is no more necessarily required, as a representative occupier, to live at No. 11 Downing Street for entertaining, when his office is in Whitehall, than a director earning £3,000 a year in an export company who feels it necessary to have a flat to entertain foreign customers. Both are performing services to the community of great importance and yet one is treated differently from the other.
Why should the director of a small company, may be a company in liquidation, a director on a salary of £1,000 a year, just because he is in title a director, be taxed on his benefits and not his employee who may be earning the average national wage of £60 a week? Ministers say that it is because a director can fix things to benefit himself. We need to have a much better excuse than that.
The concept of a representative occupier has now become an utter fiddle. It is used to discriminate between one job and another, one person and another, without any due regard to equity. It is no use the Financial Secretary saying that this principle has long existed in tax law. That is true, but it is Socialist tax policies that have rendered it now both disgraceful and unfair. It is the case that if Ministers had to pay tax on benefits they would certainly not be able to do so out of their taxed income. Therefore Ministers are not being


brought in, but directors are being brought in, whatever their salary is. There is no longer any reason for the concept of the representative occupier, which, perhaps, made sense when tax rates were acceptable and reasonable. May be there was justification for it then. To single out particular jobs in this way now is no longer acceptable.
8 p.m.
Then there is the question of cars. Why should a large company with the capacity and financial resources to provide a senior employee, a rich director, with a car from a pool be treated differently from a small company which cannot afford to run a car pool? Why should a rich director, with a Rolls-Royce, for example, and earning £15,000 a year because he is in ICI or Shell or some other big company and getting a pool car, not pay tax when the employee of a small company which cannot afford a car pool is to be taxed?
Indeed, why are Ministers deemed to have pool cars? The Prime Minister and the Chancellor of the Exchequer do not change their cars. They use the same car and the same chauffeur every day. Such a car is no more a pool car than that of a travelling salesman. Perhaps this discrimination is based on tradition, but the Government have chosen to codify the law, so they must say what justification they have for doing so.
Many hundreds of letters have come to us on this subject. One says:
I am employed, as a management consultant. by a large group which has some two dozen factories in the UK. These are widely scattered, being typically, in Manchester through to the South Coast. I spend all my working time at and travelling between these factories. I use a Granada 3000 company car but also own and run a car of my own because my family would otherwise be immobile except at weekends. On average over a year my business mileage is approximately 19,300 per annum and my private mileage using the business car approximately 2,700 per annum. At present, the 'benefit' for taxation purposes is agreed between the Inspector of Taxes and myself. According to my understanding of the proposal I should be liable to be taxed on a benefit' arbitrarily assessed at perhaps £600 p.a. Under such circumstances, I should, in effect be subsiding my employer.
I can read out a hundred letters of that kind from middle management, middle income people, working in British industry.
Let us look at how the car tax will affect the average chap on £90 a week.

First, let us take the case of a man who is a successful salesman earning £90 a week, with a company car, to be assessed now at £310 per annum against the amount of, say, £50 which he has been paying under the present arrangements. Let us say he also has a small loan from the company worth about £50. Assuming that he has other taxable fringe benefits and a small sales incentive scheme, which must be right for salesmen, a few canteen lunches and a small medical health insurance, in all amounting to no more than £290 a year, his total emoluments for tax purposes will be £5,150 instead of £4,500.His additional taxable income will be £650, and at the basic rate of 35 per cent. that will amount to £227 of extra tax, or £4.40 a week.
That is more than he has been given by the Chancellor and the TUC under the £4 pay rise this year. Not only will his standard of living this year be further eroded by the cost of living biting on the tax allowances which have not been raised to compensate for inflation, but, in addition, on his car, which he needs for his business as a salesman, he will be paying more than the extra £4 a week in his pocket which is what the Chancellor is allowing him under the incomes policy. So much for the Chancellor's determination to help middle management. This man will be much worse off.
I hope that Labour Members representing constituencies with car and car component factories will note the impact of this measure not just on their constituents but on the sales of British cars, because the major market for British cars is among business users. Relatively speaking, far more foreign cars are sold to private owners. Business cars generally come from British manufacturers. Thus, this move gratuitously damages the British car industry, which seems a somewhat strange way to proceed.
Then there is the case of the airline employees and railwaymen. My right hon. Friend the Member for Spelthorne (Mr. Atkins), my hon. Friend the Member for Uxbridge (Mr. Shersby), my hon. Friend the Member for Windsor and Maidenhead (Dr. Glyn), my hon. Friend the Member for Chertsey and Walton (Mr. Pattie) and my hon. Friend the Member for Surrey, North-West (Mr. Grylls) have received hundreds of letters


from airline employees. The great majority of airline staff and a far greater number of railwaymen than is realised will become taxable on travel for the first time. The cost of their railway and airline tickets will be added to their salaries to arrive at the limit of £100 a week. If railway employees now on £4,000 to £5,000 a year are taxable now on their journeyings on the railways, the majority of them seem blissfully unaware of it. They are not being taxed on those benefits now. With airline staff, not only will foreign travel be put beyond the reach of many of them but the tax will hit them in an unfair way.

Dr. Alan Glyn: In the airline staffs' case, it is almost impossible to evaluate what this concession is worth because such a person has all sorts of restrictions, such as not being able to come back when he wants to.

Mr. Nott: I agree. If an airline pilot wishes to take advantage of the benefit which has traditionally been available to him in working for an airline, he will not know, unless he goes to an accountant or works it out himself, precisely what his tax commitment will be.
In the airlines it is the practice to give this concession on a graduated basis whereby the employee who has been with the company for a long time benefits more than the employee who has joined the week before, which seems fair. I want to quote from another letter from an airline employee. He says:
If the Chancellor's plan goes ahead I shall, after nine years with British Airways, he paying about five times as much for my 'cheap' travel as somebody who has been with the airline for just one year but whose salary is less than £5,000! Pilots are not alone in facing this problem. There are many other staff, most of whom have worked for the airline for a very long time who will be forced to travel on package tours with other airlines while 'new entrants' employees can travel around the world at 10 per cent. of the normal fare.
What of season tickets and loans? The commuters are among the most badly hit sections of the community—perfectly decent, middle group people commuting to work, whose standard of living has been slashed by Socialism already. They are to be taxed on the loan which is increasingly being given to commuters

to buy their season tickets, some of which now cost £600 to £700 a year.
Other employees have some small assistance to enable them to buy their own homes under loan arrangements. Why is it that people who have some assistance from their employers in the form of cheap interest loans are only being given one year in which to adjust their arrangements? Where people's mortgage commitments are suddenly affected, in some cases fairly substantially, why cannot they be given a transitional period in which to reorganise their affairs'?
Why cannot we have a de minimis arrangement in regard to these loans? It cannot be sensible for the Revenue to inquire into a small loan of £50 or £100 given to some young lady living in Braintree by her employer to enable her to purchase her season ticket.
This is a matter of major importance, and the Government Benches are empty as usual. Here we are talking of hundreds of thousands, possibly more than a million, of people who do not realise that the Chancellor of the Exchequer has dramatically increased their tax, in spite of what he has said at the Dispatch Box.
As for railway employees, I have so many letters from people all over the country that I need a trunk in which to keep them. The writer of this letter says:
My present management position carries with it a free travel concession".
This was the critical factor concerning this person, who was working in Birmingham while continuing to reside in Bletchley. His letter continues:
Now the Chancellor of the Exchequer proposes to change the rules, and the consequent effect upon the long distance commuters employed by British Rail can only be viewed with horror. I shall be faced with an additional tax burden based upon the cost of the season ticket between BletchleyandBirmingham—say £900–£1,000—together with an assessment in respect of general travel. The effect of this legislation upon myself and many colleagues will be crippling, to say the least. I consider it an appalling injustice that Government action should suddenly cause people to be deprived of legitimate expectations about their economic future.
I shall quote one more letter and then leave the railwaymen till we get into Standing Committee.
One of the things
said a second railwayman, a Mr. Barber—[Interruption]. This is a Mr. Barber


from Brentwood. Lord Barber had sufficient political judgment not to throw this kind of legislation to the House of Commons. I can assure the Financial Secretary that when I was Lord Barber's junior Minister and we went through the examination of benefits in kind, Lord Barber, as he now is, had more political judgment and nous than to put this sort of thing to the House of Commons.
The letter reads:
One of the things in the speech to which I am now increasingly taking exception is that British Rail employees, with their privilege rail facilities, are being classed with other employees who have been specifically accorded, to use his expression, 'perks' as a device for beating the pay limits. This is a misrepresentation in so far as railway employees are concerned, as they and their predecessors have received these benefits from a period dating back to the nineteenth century.
Where does all this take us? Most of the people running the charities in this country are, funnily enough, maybe through a quirk of the tax law, designated as directors of the charities. I have a letter here from Age Concern, and a great mass of letters from charities all over the country. Directors of charities are usually more concerned with helping its charity than with their own salary, but these people will be taxed on benefits in kind, even if their pay is only £10 a week, because, according to the tax legislation, they are very often directors.
8.15 p.m.
Then there are all the people living in universities and teaching colleges. There are literally hundreds of people occupying accommodation in the colleges and universities of this country. As the right hon. Member for Down, South (Mr. Powell) will know, in our college, some of them are fairly ancient—Fellows of Trinity College, Cambridge. There are colleges at Oxford which are specifically charities, and, therefore, by reason of the tax law, even if some of them are Fellows earning well below the £5,000 limit, they will be taxed on their accommodation as a benefit in kind. Will they, I wonder, be classed as representative occupiers?
I know one don at my old college who for years had a room in college but who incidentally neither had lectured nor been to anything at all for 60 years. He is a well-known figure in my college. I am taking an extreme example, and may be that is not a good one to take,

but throughout colleges, universities and polytechnics in this country there are people who will find their incomes sadly eroded by this measure.
Why do the Government choose to bring forward these clauses at this moment? It is really a grave error of political judgment. Of course, the attempt of the Chancellor of the Exchequer to suck up to the trade union bosses by attacking management perks must have made sense when he first embarked on it, but what will happen in practice? It will rebound mainly on people earning £80, £90, £100, £110 and £120 a week. Those are the people who will suffer, not those in higher-paid employment as normally understood. It will not be the rich directors who will suffer, but ordinary men and women, the middle managers, the commuters and those in jobs which from time immemorial have carried certain benefits.
Of course, the Financial Secretary will no doubt say, and it is true in theory, that in equity all benefits should be taxed equally with income. That is an indisputable fact. Clearly, it is not right in theory that benefits should escape taxation and that income should not. The theory of it is clear. All benefits should be taxed. However, we have to accept that in practice it is impossible, without half the population becoming tax inspectors and the other half engaged in submitting tax returns, to tax benefits right down to the bottom of the scale. It cannot be done. No doubt the Socialist millenium would be where half the country, all Socialists, were bureaucrats drawing inflation-proofed pensions, and the other half were all living on social security benefits.
We have for practical reasons a P11D limit, and it has become ludicrously low. The limit has become indefensible. It is true that the Government raised it last year, but the £5,000 limit, if we include benefits, is now bringing in millions of people, and the Revenue will never cope with the problem. The situation is just mad.
People are getting sick of the Revenue, with its increased powers. On the last group of amendments we spoke of the Revenue's intrusion into people's lives. The Government are presiding over and encouraging the collapse of that trust between the Revenue and the taxpayer


on which the whole system depends. Anyone who, as the Financial Secretary has done, answers letters from Members of Parliament complaining about the practices of the Chief Inspector of Taxes will know that there is growing concern among ordinary people at the way in which the tax inspectors are pursuing some people.
I think that the Chief Inspector of Taxes branch is absolutely admirable. I believe that the 80,000 people working in his branch are, on the whole, men of the highest integrity and honesty; they are decent people. But I am getting concerned—I say this not with any wish to criticise particular individuals as such—with Somerset House.
The Government and the Financial Secretary are putting up Revenue officials more and more to preach Socialism in Select Committees. I sat for the first six sittings on the Select Committee dealing with the wealth tax. To some extent it was due to the questions the officials faced, but Revenue officials were actually having to preach Socialism in a Select Committee of the House of Commons, and I do not think that is a good thing at all. Some of them are talking Socialism privately at seminars. I would not say that if I could not name names. More and more Revenue officials are being drawn into the political process, and nothing but harm can come of it.
Mr. Cyril Plant is not a Revenue official but he wants less tax evasion; but he can help in that resolve by keeping his mouth shut in the Sunday newspapers. That is the best way that Mr. Cyril Plant can help. If, as I believe, he is the chairman of the TUC this year, he may want his members to barge into people's homes, remove their documents, invade their privacy, and tax them till the pips squeak, but in the end this will lead only to more and more disrespect for the Inland Revenue, and the Government, in the end, will not be able to collect the taxes which ordinary decent people are paying, have paid and, I hope, will continue to pay without attempts at evasion.
I return finally to the impact of these clauses on British industry and management. I quote a letter from the chairman of the Engineering Employers Federation:

Our member companies already experience great difficulty in ensuring adequate remuneration for their senior executives and middle management which is commensurate with the responsibilities which they bear. It is now accepted that executive staff in British industry are generally remunerated at a level well below that of their counterparts elsewhere—that there is a significant loss of high quality professional and managerial talent through emigration. The additional taxation burden which executive staff will have to bear on, for example, the provision of cars and of loans will add a further significant disincentive to the pursuit of careers in manufacturing industry.
We have arrived where? We have here a thoroughly bad clause and an ill-thought out piece of legislation which brings some benefits into tax. Probably there are many others which will be left out. As a result of what is proposed, a whole panoply of new benefits will be invented. I spend most of my time around the environs of Parliament, but I have heard of at least six proposals for avoiding the penal tax on cars.
More and more straightforward taxpayers will by necessity, as a result of this kind of legislation, be turned into tax avoiders. As the Financial Times said today:
In attempting to go for overkill and by elaborating these tax rules in legislation it is likely in large measure to be counterproductive even for the tax men. Instead of generating more tax revenue it is likely to provoke an increasing number of consenting taxpayers into militant loophole-seekers.
I can tell the Chancellor in his absence, as the pound sinks below $1·80, that some of us are sick of Mr. Cyril Plant and those union leaders who want to fight their miserable class war against decent, patriotic, taxpaying citizens. We are sick of them. We are sick of the Government. When we get into Committee upstairs, we shall tear these clauses to shreds.

Mr. Michael Shersby: On behalf of thousands of my constituents who work for the airlines at London Airport, I wish strongly to oppose the provisions of this clause which make changes in the rules for taxing the travel concessions provided by airlines to their employees and their dependants.
Although the Bill provides that the benefit relates to those in so-called higher employment earning £5,000 a year or more, in practice all staff of British Airways and other airlines are potentially affected because the start point includes


the cost of air tickets. It means, for example, that an employee on £4,600 a year who enjoys staff travel concessions of, say, £500 a year will, if this clause is passed, now be taxed.
I regard this as a mean and penny-pinching new tax which will discourage hard work and initiative. It is a piece of typical Socialist tax legislation designed to make the pips squeak out of my hardworking and dedicated constituents who do so much to make our airlines the best in the world.
It has, after all, been common practice for many years for employees to receive the products of their firms at some concessionary price or even free. There are numerous examples which include shops allowing discount to shop workers, miners receiving free or concessionary coal and homes, and car workers receiving cheap cars. It is common practice for the airlines to offer travel concessions to their own workers and to others in such a way that does not impair the commercial interests of the airlines.
The means by which the concession is achieved is to ensure that only if there is no prospect of a seat being purchased by a commercial customer will it be available to an employee. In British Airways, for example, the concession—and it is important to remember that it is a concession and not a contractual entitlement—is frequently restricted or suspended. It is governed by a series of priorities generally related to length of service in which British Airways workers have a degree of preference over others to whom the airline also makes the facility available.
In practice, the facility is subject to load which means, first, that the employee passenger will be carried on the flight only if the seat would otherwise have been left empty; secondly, that he may be offloaded at any intermediate stopping place to make way for a fare-paying passenger who has booked a seat on the flight or who for other commercial reasons the airlines wish to carry; and, thirdly, that there is no assurance that return travel will be available.
It means that there is a degree of risk. There is the possibility that at any stage of the journey the employee passenger may be separated from those with whom he wishes to travel. He may have to

bear the cost of making alternative travel arrangements or bear the unforeseen accommodation costs. Are these to be tax-deductible expenses if the new clause is passed?
Employees accept these conditions because they understand the nature of the business in which they work and because the cost is low and reflects the limitations imposed. Only in a limited number of instances is the concession allowed to be made on what is called a firm basis. This mostly occurs in relation to and in recognition of long service to the airlines. The effect of all these conditions is that the travel concession is infinitely less valuable than any type of air travel available for purchase by members of the public.
There is another vitally important aspect of this concession which is of interest to the House and, I hope, to the Financial Secretary. It is the fact that British Airways alone expects to derive an income of some £5 million in the current year from concessionary travel to which its staff and others are entitled. This is an important aspect of British Airways' income. It is a net gain because, unlike employers who provide their employees with cheap cars or even cheap rail travel, the airline would otherwise forgo completely the income derived.
There is no doubt that thousands of my constituents and those living in the constituency of my right hon. Friend the Member for Spelthorne (Mr. Atkins) and elsewhere are attracted to work for the airlines because they are interested in travel. Not only do they enjoy the excitement of working for the airline but, in many cases, they endure long hours with frequent time changes, noise, fumes and the burden of providing a 24-hour airline service. It is quite wrong that they should be taxed on this small travel concession which is, in any case, generally related to length of service. To tax the concession strikes at the roots of the policy of encouraging employees to remain in the airline's services and give it the benefit of their accrued experience.
[MR. MICHAEL ENGLISH in the Chair]
8.30 p.m.
Just let the Financial Secretary remember on the next occasion he flies with British Airways that he is trying to tax the hard-working engine fitters, pilots,


stewards, stewardesses or baggage handlers who are giving of their experience to make his journey possible in safety and comfort.
As is so often the case, other countries treat their employees very differently. We do not find the Americans, Canadians, Australians, French, Belgians, Spanish, Italians, Swiss, Dutch or Irish exacting this miserable tax from their airline employees. The only country of which I know which taxes the benefit is Germany, and the amount there is trivial—5 per cent. of the applicable fare within Germany and 10 DM. or 30 DM. if the travel is respectively within or outside Europe.
I say to the Financial Secretary that he should drop the ridiculous idea of taxing this benefit. Let us see the Government start to encourage employees who work hard instead of penalising them. Let the Government say that this small concession, which is hard earned and related to long and devoted service, will receive encouragement and not be just another complicated and thoroughly objectionable paragraph in the next tax demand.

Mr. Toby Jessel: Like my hon. Friend the Member for Uxbridge (Mr. Shersby), I have many employees of British Airways and other airlines living in my constituency. Like him, I have also had many letters on this subject in the last few days, reflecting the indignation felt by these people at this new impost they have to bear.
I regard Clause 52 as an attack on people who have the skill, luck, energy or drive to earn the not very princely sum of £100 a week or even less and who receive modest fringe benefits. This tax on them is motivated by jealousy and hatred. Most occupations have some fringe benefits. Mention has already been made of miners' coal, railwaymen's travel, the free flats and cars available to some Ministers, and the inflation-proofed pensions for which civil servants pay no contributions. In addition, staff at many shops are allowed discounts on their purchases, and bank employees can often obtain cheap loans for housing.
Airline staff can enjoy travel at a substantial discount, but this cheap travel is

available only on very unfavourable conditions. A constituent wrote to me:
The facts are these; we have a concession to fill a seat, that would otherwise fly empty, on journeys to and from London, at 10 per cent. of the published fare.
We may be offloaded en route if the aircraft fills up, we do not know for sure on which day our holiday will start, and have to return early, to ensure we do not get stuck overseas.
I have lost several days of holiday and had the uncertainty of travel spoil the start and end of the holiday.
If we are to be taxed, I will certainly not pay the difference, the airline will lose my 10 per cent. and the taxman gain nothing.
Another constituent, whose wife also works for British Airways, wrote:
When I came out of the Navy, I joined Civil Air Transport because I wished to travel. For this reason, I and most employees accepted lower wages than they could have found else-where for like responsibility.
At 15 years and at five year intervals thereafter. we are offered free trips as a recognition of long service.
My wife and I have earned six `free trips' which we have saved to use in my latter years of service. We wonder if it would be possible for you to find out if the free trips we have already earned can be used after next April without them being taxed. 
If they are liable to tax, we and thousands like us who work for British Airways will have to crowd onto aircraft during the remainder of this year or lose them." 
I shall be writing to the Financial Secretary on this point in the near future, but I hope that he will give a clear answer this evening. I support the amendment.

Mr. David Mitchell: There are a number of curious aspects of fringe benefits which I shall draw to the attention of the Fnancial Secretary and upon which I shall ask for his guidance.
First, I accept that there has to be a declaration of benefits for someone with a salary above a certain fixed figure. The figure is now £5,000, and my hon. Friend the Member for St. Ives (Mr. Nott) has referred to it as being too low. But if it is accepted that £5,000 is appropriate, why is it that the director who is earning less than £5,000 is singled out to be put into a special unprivileged position? What is it that he has done? I recognise that he may well have shown more guts, energy and initiative than many others. He may well have founded a business and provided employment for others.


That, of course, brands him as someone who is to be the recipient of epithets such as a profiteer, a capitalist, a blood sucker and all the rest of the Socialist claptrap. What I do not understand is why that person should be picked out by the Finance Bill for an additional disincentive.
The Government propose that those who have a company car should be taxed, first, on a standard assumed mileage. They are then to be taxed on the size of car that they have. This is to assume that the style and size of car is entirely a matter for the employee who will have the tax levied upon him. I think that the Financial Secretary will agree that it would be grossly unfair that an employee who wanted to have a Mini, and who would be taxed on a Mini, but who has to have a large car, should pay a greater rate of tax when he does not derive any benefit from it. For example, does the sales director of Jaguar, who goes to London Airport to collect the proprietor of a large hire-car company from Germany with the hope of obtaining a major export contract, use a Mini or a Jaguar? He will be taxed on a Jaguar, but for his own financial income it would be reasonable for him to settle for a Mini.

Mr. Norman Tebbit: Has it occurred to my hon. Friend that there are two sorts of salesman? There arc those who sell small things and those who sell large things. The chap who sells small things may well use a Mini, but the chap who has the misfortune to sell large things may be required to have a large station wagon in which to carry them about. As he is selling large things and using a large vehicle he will be taxed accordingly.

Mr. Mitchell: I was about to make that point. Let us consider the position of the managing director of a firm of City money brokers who goes to collect one of the gnomes of Zurich at London Airport. Does he use a scruff little Mini or does he use something that is reasonable for the status of the firm? If the gnome is met by someone in a scruffy little Mini he will think "This outfit is not worth very much". The pound will then go not below $1·80 but below $1.
What about the farmer who requires to have not a Mini but a vehicle in which

he can put a sack of potatoes or a sack of corn when he wants to visit a far part of the farm? Is he to be taxed on the Land Rover rather than the Mini?
What about the wine merchant—perhaps I should declare an interest at this stage—who requires an estate car so that he can turn down the rear seat and load the vehicle with orders for delivery to his customers? As my hon. Friend the Member for Chingford (Mr. Tebbit) said, what about the commercial travellers who happens to travel in a large commodity? What about the small builder who uses his car to transport his tools and a bag of cement, and perhaps four men, from one job to the next? The fact is that it will be grossly unfair for the benefit to be charged in the way which the Bill describes.
Secondly, the mileage is assumed to be a standard one on which the beneficiary will be assessed to tax. There are wide differences in the mileage used. It may well be that a man with a second car which he uses for his personal use and with a company car which he uses basically for the company's business will be assessed to tax on exactly the same scale of personal use as a man who has no second car and who uses the company car for a good deal of pleasure motoring for himself. That, again, is grossly unfair.
Then there is the question of garaging the car. If the car is garaged at the employee's home, that is the heinous offence because that then makes it definitely a benefit for him. What if it is garaged at the company's business premises? I can only ask the Financial Secretary to put himself in the position of the finance director of a company in London. What on earth does he do with 25 cars that he has somehow to garage in the City of London? That will be an absolute bomb of expenditure for him unless if it is undertaken, to the vast relief of the finance director, by the employees, who take the cars home, who are responsible for looking after them and for keeping them clean and seeing that they are in decent condition when they come back to business the next day.
Next, there is the question of the pool car. This is a fundamental problem. For the pool car there is no charge. The logic is that this is a car in which there is a constant business use and not a personal benefit.
I draw the Committee's attention to the position of the small business man. The small business man in general is somebody who lives, eats and sleeps at his business. He may well live over the shop. If he has a vehicle, he will inevitably use it for deliveries, for collecting supplies, and for one thousand and one other things. That type of person has very little in the way of pleasure outside his main motivation of building up his business, with the intention—except for this Government—of passing it on to the next generation.
The people who run small businesses—partly for pleasure, and partly for a living—do little else. I could take the Financial Secretary to a hundred such businesses—50 in my constituency. This is the reality of what a small business man does. He is travelling about running his business and he does little else. His car is used for that—more for business purposes than is the pool car.
The Chancellor and the Financial Secretary will ride about in their pool cars and pay no tax. My small business man will pay tax up to the hilt. This is one unfair distinction which is so inherent in the proposals before the Committee. For this reason, I hope that the Committee will reject these proposals lock, stock and barrel.

Dr. Glyn: I share the sentiments that have been so ably expressed by my hon. Friend the Member for Basingstoke (Mr. Mitchell). All hon. Members will agree that there is a certain element of uncertainty and a feeling of inequality about fringe benefits, but this clause is not the right way of tackling this question and will not in any way remove some of the abuses that we might like to see removed. It will attack many small people who do not deserve to be attacked.
It is ridiculous to use the word" director". There is no logic in differentiating in terms of directors who may run companies with a very small capital, merely because they call themselves directors or put the word "director" after their names on correspondence.
Then there is the question of the size of car. If an employer decides that one of his employees shall drive a certain type of car, like a Rolls or a Jaguar, even though the employee may wish to

drive a different type of car he will be compelled to use the car on which his employer insists, and his proportion of the costs will be adjusted accordingly. The point here is that in this case he has no choice. If it is his own car, he has a choice; he can get a Mini, or some other car. But in this case he is in the position of having no choice. Nor can I see any justification for the difference between this system and the pool car system, or ministerial cars.
8.45 p.m.
I shall not repeat what my hon. Friend the Member for Basingstoke said about the small business man, such as the small builder, having a car suitable for his use and having to use it for business as well as for pleasure. In many ways this is a benefit, because it means that there is only one car on the road instead of two.
The reason why I am so concerned is that, like so many others living within the ambit of an airport, I have a large number of people who are employed there. It is not only pilots who are affected. That is the point that needs to be brought out clearly. Many people who work on the ground doing small jobs will be brought up to and over the £5,000 limit. Many of them work overtime at the weekend. They are doing quite ordinary jobs but they are, nevertheless, jobs that are necessary if the activities of a company are to be maintained.
I do not want to go into details about the concession of the 10 per cent. Most employees value it. This provision was in their original contract, and it will be difficult for them to see how its value can be taken out of their contract, because in some cases, as one of my hon. Friends said, it was one of the motives for joining the service. It was known that by means of this concession they could travel all over the world.
These concessions are not like ordinary fares which take someone from X to Y, by scheduled flight and back from Y to X. The seats allowed under this concession are treated differently. They are provided only when they happen to be available. The employee may be lucky and get on to a flight that he wants when he is travelling with his family. On the other hand, he may have to wait two days for a plane and in that way lose two


days of his holiday. He may even find that at the end of his holiday he cannot get a flight back, because the seats are required by ordinary travellers. This is an extraordinarily difficult thing to evaluate, because it is not the same as an ordinary fare. Nor can it be given a proportional cost. I do not believe that anyone can evaluate the cost of this benefit.
I suppose that most of us have received so many letters on this subject recently that we have barely had time to read them. I propose to give details of a person who is about to retire. I know that the Chief Secretary is not interested in this, but it is a matter for concern for one constituent, who wrote to me saying that he had joined the service many years ago and had accumulated all his concessionary rights so that next year, when he retired, he would use the benefit to enable him to visit his family in New Zealand. He said that he had never seen his grandchildren, and that this was the one opportunity to which he had been looking forward all his life. He wanted to know—and I am asking for a direct answer—whether he would be caught and how he was placed.
There are three or four further points that one ought to mention. As has been said, these concessionary seats cannot be used when they are required by members of the public. I accept the figures given by my constituents, as they appear to be the same all round. I think that the members of airlines have pooled their information, and if I were to put the loss at £5 million a year I do not think there would be any quarrel with that. In fact, they will be losing a large sum of money.
They are also worried about one other point—they fear that the level will be reduced from £5,000 to, say, £2,000.

Mr. Kenneth Lewis: Does my hon. Friend realise the effect that this could have on someone who is earning £4,500 a year at the moment and is offered promotion? He may say "I do not want to be promoted, because I have my travel advantages, which are equal to if not greater than the amount of the increase in salary I would be getting. I prefer to stay the way I am."

Dr. Glyn: My hon. Friend has a point. But I do not think that anyone is going to

be able to evaluate accurately the amount that a man is actually getting in benefits. This particular form of travel is very different from any other, and that will be a constant source of argument.
The Inland Revenue will have a great deal of trouble estimating the value of benefits of this sort, particularly air travel. It will make tremendous administrative difficulties. I do not believe that this is a sensible tax, and I shall most certainly vote against it.

Mr. Norman Lamont (Kingston-upon-Thames): I declare an interest in that I have a company car. It is a comment on the inefficiency of the Government's proposal that I, who hardly use the car for business purposes, will be hardly more adversely affected than my more hard-working colleagues who use company cars frequently for business. I hope that my interest will not disqualify me from voicing the fears of many middle ranking executives in industry.
I accept the case that benefits in kind should be taxable. I think that it would be far better to have lower tax rates, higher pay, and a totally sensible tax regime. But that is not the world in which we live. We have to look at these proposals against the background of the financial position in which management finds itself today.
The Financial Secretary to the Treasury said only the other day, under pressure from the Left wing, that it was a fact that in post-tax incomes this country already had a more equal distribution of income than either Poland or China. I thought I must have misheard him, but I checked with the Official Report and I found that his officials had not rushed up to seek to delete this statement. So post-tax incomes in this country are more equal than in many Communist countries. That is the extent to which differentials have been squeezed. Management has suffered a very considerable drop in living standards—according to one survey it was 13½ per cent. in the last year. Just imagine what an outcry there would be if there were such a general drop in living standards throughout the population.
The sacrifice that managers in this country have made prompts us to ask, rightly, whether this is the right time at which to make this fundamental change


in our tax system. Apart from the timing, one would also question the whole fairness with which the new taxes are to be applied. One would have thought that the new r égime should apply equally to the public and private sectors, but that is not the case. One area which has received some publicity in recent months concerns benefits in kind for Foreign Office employees. I asked the Financial Secretary recently:
whether the proposals in the Finance Bill for the taxation of fringe benefits apply to educational allowances for children of diplomats serving overseas".
He replied:
No. Boarding school allowances paid to Foreign Office employees serving overseas are certified by the Minister for the Civil Service as representing compensation for the extra cost of having to live outside the United Kingdom."—[Official Report, 6th May 1976; Vol. 901, c. 469.]
All well and good. I know that diplomats incur extra cost but so, too, in many circumstances, do business men who are confronted with these problems just as much as are diplomats.

Mr. Nott: I was not aware of that Answer. Will my hon. Friend ask the Financial Secretary whether the benefits that serving officers in the Forces get for sending their children to school in this country are taxed?

Mr. Lamont: No doubt the Financial Secretary will answer my hon. Friend's question. I think he will find that the difference arises as between the taxation of allowances which are paid to people who are in the United Kingdom and those which are paid to people outside it.
One would have thought from the provisions of subsection (1)(b) that the taxation should apply to fringe benefits paid to Foreign Office employees. This covers not only educational allowances but loans for the purchase of cars, accommodation help, entertaining expenses and help in the house. Subsection (1)(b) provides that the benefit is not, apart from this provision, chargeable to tax as income. In other words, it will not be subject to tax if it is not already so under tax law. Quite clearly one would have thought that the provisions should go further and ought to apply to business men who find

themselves in a similar situation with similar commitments.
We also come to the question of the Civil Service and Government powers. Why do not Permanent Secretaries have to fill in P11D forms in respect of their cars? Some civil servants are picked up from the Underground station when they arrive in London. No doubt we shall be told that these are pool cars, but the distinction between private use and official use is not always very clear. Cars may sometimes be used to take a Minister's children to school when he is on his way to the office. One has on occasion seen official cars outside the opera house—no doubt to take Ministers back quickly to the House of Commons.
I do not wish to make any particular official use and private use is not always easy to define and I suspect that the discretion involved in tax treatment is simply for the convenience of both Minister and civil servants.
9.0 p.m.
We then come to the clearest case of where the taxes should bite on the public sector, and that surely is in respect of Ministers' official accommodation. If the provisions are too unfair for the Cabinet, they are too unfair for everyone else. If they are designed to get equality of treatment, that equality, which I accept, should apply to Ministers' houses.
It is quite clear that the official accommodation in Downing Street, Carlton House Terrace and Admiralty House ought to be liable to taxation under the provisions of Clause 52. I cannot see what possible excuse there can be for the Government attempting to exempt, as they have indicated they will, official accommodation from the provisions of the Bill. It cannot be said that Ministers reside in, and use, their accommodation solely for their official duties. We all know that they spend their private time, as well as their official time, there. They do their private entertainment there as well as their official entertainment.
Nor can it be said that this is accommodation which an employee's employer is providing for him. This is another justification which has been put forward through the Press. It would seem quite iniquitous that this justification, from which directors of companies are specifically excluded, should be even attempted to be applied to Ministers.
I do not believe that it could arise, because under the terms of the legislation, coupled with that provision is the requirement that the person receiving the benefit in kind—the accommodation—must actually be required to live there. We know that there is no requirement that ministers should live in their official accommodation. My right hon. Friend the Member for Chipping Barnet (Mr. Maudling), when Chancellor of the Exchequer, did not live in his official accommodation for a while. The right hon. Member for Huyton (Sir H. Wilson), when Prime Minister, did not live in his official accommodation for a while. It cannot be argued that one is required, in the course of fulfilling one's duties, to live in this accommodation.
It is quite clear that Ministers' official accommodation ought to be liable to charge and the question we have to ask ourselves is, what would be a fair asssessment? As far as the Chancellor is concerned I would settle for a rental value on No. 11 Downing Street of about £12,000 a year, which would give him an asssessable income, with his £16,000, of about £28,000 a year taxable income. If the Chancellor is to dole out this nauseating medicine he ought to try to take it himself.
We have not quite got to the stage of having supermarkets where only Government officials and Ministers, can go, but more and more we seem to be moving towards a society where officials and politicians are the only people who count and who are to have the perks. At the same time middle management is being squeezed more and more. Their differentials are being eroded, and one sees the whole spectre of the cash economy with millions of people, employed in self-employment and in casual employment, going around demanding payment in cash for work done.
The hon. Member for Tottenham (Mr. Atkinson) estimated the other day that the cash economy is about £3,000 million. I am not sure whether the GDP figures we have are complete nonsense because of the cash economy but one thing is becoming clear—that being employed in a large organisation is a mug's game and no one will give one any encouragement to do so.
I accept that benefits in kind should be taxed. They are taxed in many other

countries, such as France, Switzerland and Holland. I am also sure that many companies would prefer a r égime where they could remunerate people in a straightforward way through paying them adequate salaries, but the regime we have at the moment militates against that.
In the present circumstances loopholes like these allow people to breathe when executives have been squeezed more and more and are becoming more and more demoralised. The Government's own Professional and Executive Register estimated the other day that no fewer than 30,000 executives wanted to leave this country—a third of the total on the register.
These proposals are hightly vindictive and the least that the Chancellor could have done was to make his own pips squeak.

Mr. Michael Grylls: Like my hon. Friend the Member for Kingston-upon-Thames (Mr. Lamont), I believe that a much better regime—I would accept the swap happily —would be for the rates of tax to be altered and all fringe benefits done away with, but my hon. Friend knows that the growth in fringe benefits over the last few years is a direct result of high taxation. As my hon. Friend said, this is having an appalling effect. Not only high taxation but, now, the latest attack on the normal benefits of business will drive more and more people abroad. It is odd that when we are trying to encourage industry to invest and export salesmen to do more, it is just those people who are being picked out under this legislation. That is crazy.
We were talking at Question Time only today about the results of Leyland. If this new tax on company cars begins to bite, as I suppose it will, it will have a disastrous effect on the car division of Leyland. What answer have the Government given to Leyland? I understand that the Leyland board has made representations to them about this measure.
There are some curious provisions in these clauses. Clause 52(2), for example, refers specifically to "entertainment". Are we to assume that if an export director takes someone to a cabaret or a display of belly-dancing, it will be taxed as a fringe benefit? Will he have to assess the cost of the evening and declare it?


If not, how is entertainment to be calculated? An export salesman's night out with a customer may become pretty expensive.
These are, perhaps, only small matters, but they are symptomatic of the ridiculous way in which this tax has been proposed. It has always been a joke that people working in a chocolate factory are told that they can eat as much as they like: they never eat much after the first day, because they gorge themselves. Will they now pay tax on the number of chocolates they eat, because they are a fringe benefit? There is no end to the ludicrous features of this absurd tax.
Let us suppose that a public-spirited company—let us revert to British Leyland—provide people doing unpleasant work with a swimming pool for use in their time off. Will that be included as a benefit? Clause 54(5) refers to a benefit consisting in an asset. All sorts of strange things will come up, apart from what my hon. Friends have already said about airline staff, and so on.
I do not begrudge the miners their free coal. It is right that they should have it. I hope that they go on having it, and I would not wish it to be taxed. Mining is probably one of the most unpleasant jobs there are, so why should the miners not have the coal after all the time they spend digging it up?
There are already £5,000-a-year miners. I suppose that most of us hope that within a reasonable time all miners will become £5,000-a-year miners. If that happens, they will be all assessed on their coal. It is a petty, ludicrous tax. I cannot believe that the Government have thought it out. It is as if they had been mesmerised by the idea of a company director or company executive being provided with a car and said "We must attack him, so we shall have a wholesale onslaught."
I am not sure that I agree that Government cars will be exempt. According to Clause 56(2)(a), a car that is used by one employee is not a pool car. In other words, to be a pool car it has to be available for everyone. The Prime Minister's car, the Chancellor's car and the cars of senior Ministers are not available for other people, but are available exclusively for those Ministers. It will not do

to fiddle the books and try to claim that they are pool cars.
It is ludicrous that very large firms which can provide a pool of cars for their middle management and senior directors will get away with it, whereas smaller business men who have a car for their business, who go to the cash-and-carry stores to get goods for their shops, or to Covent Garden to get fruit and vegetables for their shops, will be hard hit by the tax.
I have many British Airways staff in my constituency. The airline ticket cannot lightly be set aside. British Airways staff expect to get airlines tickets as part of the conditions of their employment. If they are to be assessed on the value of the tickets, what value is to be taken? The rates of airline tickets are in a state of chaos. It is possible to get extremely low rates from a tour operator. Airline employees will be taxed on tickets at a higher rate than if they purchased them on the free market.

Mr. Barney Hayhoe (Brcntford and Isleworth): Does my hon. Friend agree that in his constituency, like mine, many people who earn less than £5,000 a year are incensed by this provision? They say that their expectations for the future are endangered, and they are protesting vigorously as a matter of principle rather than as a matter that directly affects them. We should take account of the strength of that feeling.

Mr. Grylls: My hon. Friend is right. What he says is apparent from the letters that I have received, not only from the people at the top of the airline tree but from people who are working their way up and have expectations of these benefits. The Financial Secretary will find it difficult to assess the value of the tickets.
Clause 54(4)(b) refers to a benefit that is substantially the same as one that is provided for the rest of the public. An airline ticket provided for a member of the staff of an airline is not the same as the airline ticket that is provided for the rest of the public. The public are not liable to be tipped out at Abu Dhabi because the airline is full for the next part of the trip. That cannot be classified as a normal trip; it is an operation to fill up the aircraft. Staff who are dumped off may have to pay for two nights at a hotel, and may be separated from their


families. I hope that the Financial Secretary is able to interpret the Bill. I do not understand the wording on page 35, in line 1:
is substantially the same as one which they so provide".
I do not believe that a ticket provided for airline staff is the same as a ticket provided to fill up places in an aircraft on occasions when other people do not wish to travel. Those tickets are in a different category.
The income involved is no small amount. We must remember that a sum of £5 million is involved in concessionary fares and that that income will be lost to a nationalised airline. Surely there are enough problems without adding that one.
9.15 p.m.
I wish to put a number of points to the Financial Secretary. It may be said that these matters can be considered in Committee upstairs, but I hope that we shall deal with them in this debate on the Floor of the House. We must remember that many people who will read this debate with interest tomorrow will want to know where they stand. They will want to know whether they will be brought within the scope of this legislation.
I wish to make a plea to the Government. I ask them to forget this petty, unnecessary, damaging clause. I ask them to be man enough to admit that they have made a ghastly mistake, which will affect people adversely—and the people affected are those in the lower to middle income bracket who are already been squeezed. I refer to the people who in the last year have seen their income drop by over 13 per cent. Is it right that such an imposition should be placed on top of all the other worries for such people? This is happening at a time when we are all being asked to make sacrifices to solve our problems. I hope that the Financial Secretary will be able to alleviate those worries.

Mr. Tebbit: It has been said in the past
It's the poor what gets the blame,
It's the rich what gets the pleasure
I think it can be truly said that even the poor have had very little pleasure recently, despite the fact that the Chancellor has seen fit to tax the rich. More

and more he has resorted to provisions which have hit the poor. However, this tax does not hit the poor. It is not like income tax which strikes at the poor, although that, too, began as a tax on the rich.
The tax with which we are now dealing is intended to hurt the rich, but its effects will hurt many ordinary wage earners.
I choose my words carefully when I say that it is intended to hurt the rich, It is not a tax aimed at raising revenue to carry on the business of Her Majesty's Government, but it is a tax which has the object of hurting, and indeed spiting, particular groups in the community. Unfortunately, even if it is thought right that those groups should be hurt, the tax has to be drawn so widely that it will hurt many others whom it was not the Government's intention to hurt.
I agree with those who have said that there should be no system of perks—no tax-free bits and pieces on the side. But before we reach that situation, we should have to have levels of salaries and differentials that enabled the system to make sense. But here is another proposal to squeeze differentials. Not only is it a tax, but it is a tax at the marginal rate.
Hence, to take the case of airlines, of which we have heard much this evening, we shall find that the differential between the captain of the aircraft and the co-pilot will be squeezed still further. This squeeze is going on in consequence of the incomes policy of the Government, or the TUC, which has been running for almost a year and which looks as though it will become a permanent feature of life while the Government are in power.
I am puzzled about many aspects of this Bill. Consequent upon what my hon. Friend the Member for Kingston-upon-Thames (Mr. Lamont) has said, I am beginning to wonder whether the lunches which we nave when we go out and are entertained or entertain others during our work as members of Select Committees ought not to be taxed. After all, they are perks which we receive in the course of our work. Perhaps they should be taxed, too. If we are to tax these other people we should at least set a good example, along with the Chancellor, the Prime Minister, the Government Chief Whip and the civil servants and all the other


parts of the new establishment of the Socialist egalitarian bureaucracy which leaves the bureaucrats richer than anyone else.
Because I know more about it than other aspects, I want to deal with the way in which this proposal will hit those people in airlines. I do not represent BALPA in this House although I am still a member of that association. Tonight I imagine that what I say will represent the views of almost all its members. I think it will represent the views of members of many other unions, too.
Hon. Members will know that I worked for BOAC. I wonder whether I have an interest which I ought to declare because I am a pensioner of British Airways. Do I get taxed on the continuing concession of cheap travel which I have? Are pensioners to be taxed? When will that be made clear? I should add that my son works for British Railways. I am not sure that he does not have a concession which, when he marries, will enable him to take his wife on cheap travel occasionally—possibly even his parents. I might have a double interest.
It is curious how this air travel concession has angered the Inland Revenue for many years. There was an attempt to tax this concession 15 years ago which ended in the High Court when the Inland Revenue was defeated. So tonight it is seeking its revenge. The Revenue has not drawn the Bill very well. It has been suggested that seats in pool cars will not be chargeable. Why, then, are the seats in aeroplanes to be chargeable? They are pool seats, too. No one has the special use of one of those seats.
Let us look at the benefits we are talking about and first at the benefits to the employer. Certainly it is a benefit in that it is an incentive for people to work for a particular employer who can offer this facility. It is certainly a benefit for staff in that it is no doubt a good thing for them to experience at first hand the service which they sell to others. I do not mean only the pilots. I mean the chaps in the hangar, in the office—every member of staff. It is certainly good in revenue terms for the airlines. The figure of £5 million has already been quoted and I am assured by British Airways

that it is correct. This practice represents £5 million of revenue to the airline which it would not otherwise receive.
Every pound of that revenue which British Airways does not receive is a pound less in the public purse. It will either be a pound less profit to British Airways or a pound more in losses which will be subsidised out of taxation. That is probably the biggest slice anywhere in all the sums we are talking about. The airline seat is not something which can be saved on Monday to be sold on Tuesday. It is as perishable as ice-cream without a refrigerator. It is as perishable as a newspaper. There is not much sale for yesterday's newspaper. It is as reasonable for the airline to sell seats which are empty at a cheap rate to its employees as it is for a greengrocer or Marks and Spencer or Sainsbury's to sell perishable produce cheap to their employees on a Saturday night when they put up the shutters. We would think it crazy to institute a system which forced the greengrocer to throw his products in the dustbin rather than let his employees have them. Yet the Government are proposing a system which will force the airlines to do the same sort of thing to the public detriment and loss.
There is a self-evident benefit to the employees, but what is it worth? It is worth to British Airways £5 million a year, and more in good staff relations. What is it worth to the employee? In the 17 years for which I worked for BOAC, I travelled as a staff passenger at reduced rate three times to Rome, once to New York and once to Zurich. It seems very little when the perk was available to me all the time. The heart of it is that it is not nearly such a wide concession as the public and, presumably, the Treasury believe.
That brings one to the question of the assumed value of the concession by the Inland Revenue. The employee travels subject to load—that means that he may not get on board the flight that he wants, that he may be off-loaded en route. I came back to England from Los Angeles last weekend. The flight on British Airways was full, and 40 people attempting to travel on staff rebate tickets were left behind in Los Angeles on Saturday night. What would the Treasury say was the value of those tickets? Is it the normal fare less the 10 per cent.


paid? Is the cost of the extra night or nights in the hotel in Los Angeles deductible from the value? If so, it is getting a little thin on value.
What about the loss of a day's pay for being late back from a trip of that sort? A day's pay is lost if the employee is back late from such a trip It is no good his saying that he was off-loaded or could not get abroad an air craft. Is that deductible from the benefit? What about the loss of value in a holiday which starts late? Is that deductible? Is an allowance to be made for the fact that the staff traveller normally plans to end his holiday a couple of days early to try to ensure that he is back at work on time, thus effectively losing part of his holiday entitlement? Is that deductible from the benefit he is held to have?
The whole clause is sloppily drawn. I have already observed that there is doubt in people's minds whether this charge falls on pensioners of the airlines. Does it apply to those with incomes from two sources or more which aggregate to more than £5,000 but where the benefit is provided by an employer from whom the beneficiary receives less than £5,000? Does it apply to the married couple working for the same employer whose income aggregates to more than £5,000, or only if each of them has an income of more than £5,000?
Is the provision meant to catch the worker in the airlines on average industrial earnings who takes his family to Australia perhaps once in a lifetime—because it will catch him? The ridiculous situation might arise where staff travellers all want their holidays before the end of April in order that they can go within a period which will enable them to split the benefit between two tax years.

9.30 p.m.

Mr. David Mitchell: Would my hon. Friend envisage a situation, in the case he described, of somebody going to Australia for a once in a lifetime journey, where the tax liability could actually be more than his total income in that year?

Mr. Tebbit: It is very possible indeed if he has a family of three or four children with him. I do not know what the Treasury would expect to do in that case.
Will it apply to the man, posted overseas by an airline, who wants to come

home to see his family more often than the airline allows as a standard part of his contractual right, and who comes home on a 10 per cent. ticket? Will it apply to him, or will he be in the same situation as the Foreign Office diplomat, who has the non-chargeable benefit of education for his children when he is posted overseas?
The Government should realise the extent of the anger caused by this proposal. I wish they had sent somebody to Heathrow Airport last Tuesday, when the airlines came to a stop because there was a mass meeting of employees to discuss this matter. If the management did not encourage it, they certainly did not object to it. A good many representatives of senior management were there, too. Those trade unions represented at the airport unanimously opposed this measure.

Mr. Sydney Bidwell: My understanding, as someone with a constituency close to the airport, is that the trade union representatives do not oppose the principle but are considerably worried about the possibility of overvaluation. They do not oppose the general principle of going after the fringe benefits, provided that it can be operated in a fair way.

Mr. Tebbit: I am most grateful to the hon. Getnleman. He makes the position crystal clear. The trade union movement does not mind who the hell is taxed, or how hard people are taxed, unless it hurts trade unionists. It agrees with the principle of it, but not with the particular application of it. I do not know why on earth we have not had a Trade Union Members (Exemption from Taxation) Bill brought forward in this House. Presumably it will come before long.
The message from that mass meeting at Heathrow, which was attended by very many members of trade unions, was not that they did not like the way in which it was being valued, or something of that sort, but that they deeply and completely resented the way in which the Government were attempting to tax the benefits. That was the message. All the members at that meeting were told to write to their Members of Parliament about it, and to get their Members of Parliament to come to the House about it.
I look across the Floor to the wide open green leather spaces opposite, and I wonder where are the chaps who get their election expenses partly paid by trade unions so that they may look after the interests of the members. We have not heard a word from them. The hon. Member for Ealing, Southall (Mr. Bidwell) has crept in recently, presumably because he is wondering whether he can get home before long. He is no doubt hoping that the debate will soon be over and that he can decently steal away after the Government have done their dirty work.

Mr. Bidwell: I came to listen to the hon. Member.

Mr. Tebbit: I am grateful to the hon. Gentleman. When he finds the hon. Member for Feltham and Heston (Mr. Kerr), who is a Member sponsored by the ASTMS—many of whose members are affected—he can tell him what I said. I hope he will also look round for the hon. Member for Bethnal Green and Bow (Mr. Mikardo) and tell him what I have said, because he is another Member sponsored by ASTMS. I know what the ASTMS members at London Airport think about this measure. They are not worried about the niceties of whether it should apply to somebody here or somebody there, a director of a bank, or anything else. They are worried about the fact that, as I observed, at the beginning of my remarks, the taxes which are supposed to hurt the rich are now hurting the ordinary members of the public, the ordinary wage earners.

Mr. David Mitchell: Members of Parliament.

Mr. Tebbit: I wish, in a way, that they were going to hurt Members of this House more—not that I want to take any further burden of taxation, but it would be a standing disgrace if Members of Parliament and, above all, Ministers and civil servants did not take their own filthy medicine.

Mr. David Mitchell: My hon. Friend has referred to trade unions which give financial assistance and retainers to certain hon. Members. Are we to understand that these, too, are taxable?

Mr. Tebbit: That is a very interesting point which I am sure will be pursued.
If the Committee divides on this clause, I shall not be voting. It so happens that I am paired to oblige a Government supporter who cannot be here. But I have come here to speak on behalf of trade union members whose sponsored Members of Parliament are not here. It may be that they will come in to vote, but they have not been here to make their voices heard.
If I may digress slightly, once again we see what happens when we have "sweetheart" unions. That is a term of abuse used for a bosses' union. I look across this Chamber tonight only to see that hon. Members who are sponsored by trade unions are absent. They are not here because they wish to spare themselves embarrassment. They would have to speak either in favour of this filthy proposal or in favour of their members. It is clear which are the real "sweetheart" unions now. They are the kept creatures of this Government, and this Government are the kept creatures of the trade unions. For once I hope that, when the trade union voice gets through to the Treasury and the Treasury is told to take away this rubbish and tear it up, it will listen.

[Mr. BRYANT GODMAN IRVINE in the Chair]

Mr. John Wakeham: As this debate proceeds, the effect of Clause 52 and subsequent provisions will become much more apparent to people and will cause a great deal of worry and resentment among many executives and others on relatively modest levels of salaries. I accept that some of the differences and problems that have arisen are the result of the political spite of Government supporters. My hon. Friends have spoken about a great many of the clauses that will affect benefits in kind and about the concern that is felt by middle management and senior staff.
I wish to deal with one other aspect of this matter. One of the advantages claimed by the Chancellor of the Exchequer in his Budget spech was that these proposals would produce a great deal of simplicity in the taxation system—an advantage which, if it were true, we should all welcome. However, in my opinion these proposals are unlikely to produce much in the way of simplicity for the overall body of taxpayers.
Many individual arrangements that nave been made between taxpayers and the Inland Revenue will have to be altered as a result of the provisions of this clause. A person may have a company car paid for by his company that will fall to be assessed in the way that the Chancellor proposes, but he way well have a second car, provided and paid for privately by himself, which on occasions he uses for business purposes. I have in mind those occasions when his company car is being serviced.
On many occasions arrangements are made with the Inland Revenue that private benefit from the car provided by his employer is, in practical terms, much the same as the business use of a private car for which he pays the expenses.
All these arrangements will have to be renegotiated with the Inland Revenue. I suggest that there are hundreds of thousands of cases in which special arrangements have been made which, as a result of this legislation, will require alterations and additional complications. It is very unlikely that these proposals will result in a simplification of our tax legislation. No doubt there are many good legal brains at this moment thinking of quite legal and proper ways of mitigating the worst effects of some of the more spiteful aspects of this legislation. This will continue while our direct taxation remains so high.
Another aspect of this question that is causing me considerable concern is the proposal to assess benefits in kind not on the basis of the cost to the employer but on a notional or arbitrary basis. For instance, an arbitrary basis is decided for cars that has nothing to do with the cost. This will produce many unfairnesses.
Our departure from the basis of assessing benefits by reference to the cost to the employer could not have been more graphically brought out than in our discussion about airline fares and the cost to the public and the employer. That is the classic example of a switch from the principle of taxing a benefit by reference to the employer, and in attempting to find another form of assessing the benefit we have discovered many anomalies within a matter of days of the legislation being introduced.
I do not believe that the proposals will produce the simplification that the Chan-

cellor claims as one of their justifications. Instead, there will be more complications.
Inherent in the proposals is an extremely serious departure from the basis of taxation in this country. For these reasons, I shall oppose the proposals.

Mr. Cecil Parkinson: I start by declaring an interest. I am leader of the Institute of Directors' parliamentary panel, and I also have a company car. The institute's parliamentary panel produces a very large declarable income—nil.
My hon. Friend the Member for Kingston-upon-Thames (Mr. Lamont) said that if tax were charged on all benefits to everybody, regardless of income, he would have no objection. I agree with him. If everybody paid tax on everything that could be called income there would be substantial reductions in our tax rates.
I accept the principle of taxing benefits, provided it is done on a fair basis for everybody, but this is not, and has not been, the case. In the Bill, a particular group has been singled out by the Chancellor for special treatment. Anyone who describes himself as a director, regardless of the size of his company—I know some people who run sweet shops who are company directors—will be penalised by the Chancellor. Anyone with an income in excess of £5,000 a year will also be picked on by the Chancellor.
Why is the right hon. Gentleman picking on these groups? They are people who, in the main, have suffered a pay freeze as a result of the Government's policy in the past year. I make no complaint about that. The Government have a right to impose the pay freeze, but many of the people caught by the change in legislation that we are now discussing have had their incomes frozen for a year.
Secondly, they are people who can expect a maximum pay increase of £4 in the next phase of the Government's pay policy, provided that the trade union movement accepts that policy on 16th June. Thirdly, they are people who, day after day, have to listen to lectures about sacrifice from Mr. Jack Jones. In the course of the past year Mr. Jones has done an excellent job in ensuring that


his own members have made very little sacrifice. The facts are quite unarguable. The average industrial wage, which most of Mr. Jones's members receive, has increased by over 50 per cent. in the past two years. There has been no sacrifice on the income front comparable with the sacrifice that those with higher incomes have made during the freeze.
9.45 p.m.
The rest of us have watched the country have imposed upon it Socialist measure after Socialist measure at the behest of Mr. Jack Jones. He has done extremely well out of this Government during the past few years. He and his friends, who have a vision of society that I do not share, have had the joy of seeing furthered the prospects of that type of society.
The group that I am talking about that will be penalised tonight has had its wages frozen. It has watched Mr. Jack Jones getting away with murder and it has had to take lectures from him about sacrifice at the same time. What is more, it is seeing this legislation introduced into Parliament by Ministers who have made arrangements not to be affected by it themselves. They are to be protected from its consequences. We are watching this legislation being put up to Ministers by civil servants, a large number of whom are on incremental scales that have absolved them from the effects of the pay freeze They have inflation-proofed pensions and perks that will not be assessable.
If we are to value everything, what value is to be placed on the prospect of appearing in the Honours List, or the possible job in a City bank after retiring from a senior job in the Treasury? All these things are perks, or by-products—call them what one will. They are benefits, and they accrue. We all know that they accrue as sure as night follows day.
My hon. Friends have found it interesting that Ministers have arranged to exclude themselves from the provisions of the clause. But this is only an extension of a type of thinking that has been adopted by Labour Treasury Ministers for a very long time. I remember the days when I was in practice as an accountant in the City, during the term of office of the previous Labour Government. The Treasury came forward with

the notion that entertaiment expenses were not to be allowed. If one was entertaining a foreign visitor or a foreign customer, entertainment expenses were allowable, but they were not allowable for entertaining one's largest British customer.
I remember my clients reading, day after day in the Court column of The Times, about the activities of the biggest entertainers of them all. Any Minister, however junior or unimportant, was to be found at Lancaster House hosting some sort of conference. My clients used to say to me "It is a bit rich. I spend my time trying to earn profits and paying taxes, and if I try to entertain my largest customer my expenses are not allowable, but I see these Ministers, who are spenders, not creators, giving parties night after night."
The then Prime Minister was the biggest giver of working dinners of all time. There was never a night when No. 10 was not full of schoolmasters, vice-chancellors, trade union leaders, or television personalities. They were all being talked to by the Prime Minister at, presumably, someone else's expense, but that was not a perk—that was working. However, business men who were working and earning the money to pay for the Prime Minister's dinners. and those for his friends, were told that if they tried to do it for their customers they would be doing something highly improper.
As the Committee will probably have gathered, I object to the clause that we are discussing. I do so for three or four reasons. First, I regard it as an extremely vindictive and arbitrary clause. Directors and those earning over £5,000 a year are co be caught. We all know that there are hundreds of thousands of people who have perks that are tax-free and will not be caught.
I will give an illustration. I once acted as arbitrator in a dispute between the Electrical Trades Union and an electrical company. I was absolutely staggered at the scale of travelling expenses and subsistence allowances to which ETU members are entitled. It was almost impossible to work for the ETU and an electrical contractor and not to have a substantial tax-free surplus at the end of a week of travelling and subsistence allowances, on the scale of allowances that then existed.
When the general secratary of the union made his final plea for an award he said "And I hope, Mr. Parkinson, that you will find it possible to make the award in tax-free form by increasing our benefits in kind." That was very sensible of him. He was behaving like the good capitalist that most trade unionists are, if they will only let themselves go.
If we are to talk about taxing all benefits, what about council house tenants? What about those people in Camden who are paying £5 a week for a house that is costing the Camden council £60? What about the social wage that the Chancellor boasts about, where people get a certain sum that is available in a very arbitrary fashion—just one of the bonuses that go with a certain kind of existence?

Mr. Tebbit: Clause 54(4) shows that the employee of a local authority who lives in one of the authority's houses should be taxed on its value.

Mr. Parkinson: I am only a simple chartered accountant and I would not dream of crossing swords with my hon. Friend in his discussion of that provision.
Mention has been made of railwaymen, airline employees, and employees of insurance companies who get loans and help with mortgages. I have mentioned the Electrical Trades Union. We know of many other cases in which agreements have been made for subsistence allowances or travelling allowances that have little to do with the real cost of subsistence or travelling. The allowances are paid.
The Chancellor, in an attempt to appear fair, said in his Budget Statement:
…I intend that the provision of car and loan benefits at least should be taxable in the hands of all employees whatever their salary"—
but he qualified that by saying:
when staffing in the Inland Revenue permits." —[Official Report, 6th April 1976; Vol. 908, c. 263.]
There was no mention of any other benefits—just the two that we are considering tonight. This proposal is vindictive, and very arbitrary.
I suggest that the legislation as it affects the provision of cars is unfair. It has been said by a number of Conservative

Members that the person who uses his car for a small business mileage and who has a large personal mileage may be better off under the Government's proposals. The person who uses his car for a large business mileage and a small personal mileage may be worse off.
What is wrong with the present system'? Anybody who has a company car has individually to agree his assessment with his assessor of taxes. Is the Chancellor saying that inspectors of taxes are incapable of administering the law? Is it wrong that each case should be looked at and agreed with the inspector of taxes?
The only group of people who will benefit from these grotesquely unfair proposals are the staff of the Inland Revenue, whose job will be made easier. Is it Parliament's job to persecute the individual, so that the life of tax inspectors can be made a little easier? To date the Government have made no case of any kind for this totally unjust approach to taxing company cars, which I think will produce many injustices.
I feel that in these proposals the Government have set off down a very long road. I do not know whether they are trying, via the tax system, to persecute people, to try to tax people in society, to say that they will cancel every benefit that goes with the job regardless of the disadvantages. How many of us want to be miners, to qualify for free coal? How many want to work on British Railways, so that they can qualify for free travel? How many want to be the sales director of a company, to get a perk by way of a car? A job can carry many disadvantages and difficulties, and if there is a perk, is it really necessary for Parliament to try to seek it out and tax it, and not compensate for the disadvantages of the job that a person is doing? There is rough justice about the present system. There is a big injustice built into the Government's proposals. Why pick on directors? We know that they are part of the Labour Party's demonology, but could not we drop this bit of nonsense once and for all?
I urge the Financial Secretary to consider Amendment No. 97, in my name, which proposes that if this pernicious piece of legislation is to be introduced its introduction shall be postponed, because undoubtedly many salary scales have been fixed to take into account the


odd benefit that may be in existence and may not have been taxable to date. It may be that the Government will get their way and these benefits will become taxable, but there will need to be a period in which salary scales can be adjusted to take these changes into account. I hope that the Government will come to the conclusion that delaying the introduction of these proposals for another year, even though they get their way, will not be particularly damaging and may even promote something about which the Government talk but of which one does not often see anything, namely, justice.

Mr. Nicholas Winterton: We have heard a fine presentation of the inadequacies of the Government's proposals and I congratulate my hon. Friend the Member for Hertfordshire, South (Mr. Parkinson) on the way in which he put over his argument. I hope that the Financial Secretary will consider carefully and deeply the many valid points that have been raised.
I am sure that many hon. Members have received representations from constituents about the Chancellor's Budget proposals to tax employees' concessions. I do not intend to delay the Committee for long, but I wish to elaborate on one or two of the points raised by my hon. Friend the Member for Chingford (Mr. Tebbit). He talked about airline pilots and those who work for the airways in this country, and only today on getting back to London I received a letter from a constituent who is an airline pilot employed by British Airways. He is based at Manchester, and he points out to me, and underlines it in his letter, that as a captain in an airline he is one of the lowest-paid major airline pilots in the world. That is important to note.
His letter continues:
It goes without saying that I am also one of the most highly taxed.
Under this Government perhaps that is appropriate.
Everyone knows Air France pilots get the equivalent of £42,000 per annum. Not everyone knows that due to special considerations, such as the risks involved in the occupation and the compulsory retirement at 55 years, such a pilot"—
referring to the French—

takes home about £37,00 per annum, KLM and Sabena, (Dutch and Belgian) pilots get in excess of £30,000 a year as do the Italians. Lufthansa and Iberia pilots get nearly £30,000 a year. Scandinavian pilots"—

It being Ten o'clock, The CHAIRMAN left the Chair to report Progress and ask leave to sit again.

Committee report Progress.

BUSINESS OF THE HOUSE

Ordered,
That, at this day's Sitting, the Motion in the name of the Prime Minister for the Adjournment of the House may be proceeded with, though opposed, until half-past Eleven o'clock or for one and a half hours after it has been entered upon, whichever is the later, and the Motion relating to the Select Committee on Direct Elections to the European Asssembly may be proceeded with, though opposed, until any hour.—[Mr. Graham.]

FINANCE BILL

(Clauses 14, 21, 24, 26, 27, 48, 52 and 64: new clauses relating to capital gains tax)

A vain considered in Committee.

Question again proposed, That the clause be read a Second time.

Mr. Winterton: The letter continues:
Scandinavian pilots, too, receive a similar figure".
But what about British pilots? After more than 20 years service in British Airways, and its predecessor BEA, my constituent receives what might be regarded as a large salary by some standards of £10,376 a year. My constituent's letter goes on, describing the Chancellor:
Now this appalling Healey man wants to tax my concessional travel. It is a pity my union is not as strong as the NUM for example. Can you see the result in the valleys if the coalminers' coal or free houses were to be taxed? This proposal is one more example of government through envy, greed and vindictiveness, and will, if instituted, enlarge the very low morale problem among British Airways pilots. You will appreciate the effect morale can have on flight safety. Remember Papa India and all the 'aggro' which preceded its crash. The next time you fly on a civil British airliner you might consider for a moment the mood of the crew.
This is an important debate. The Government are being very selective in the way in which they are hitting people


below the belt. The people they are hitting are those who are doing a great deal for this country. My hon. Friend the Member for Hertfordshire, South talked about the Government getting at the bogyman of the Socialist Party—the director. Many directors are providing very good employment for many people.
Surely the Chancellor has stated previously that the middle income group of people require Government consideration and sympathy because this is the group which has borne the brunt of the pay

freeze and all the other evils of recent years. Despite the fact that the Government have lifted the tax thresholds marginally this year, that has been more than offset by the rates of inflation. Far from helping the middle income man, the Chancellor has hit him again, and he is the very person this country needs to survive and prosper.
The proposals in this clause are spiteful and vindictive, and I hope that the Government will have second thoughts before the Bill proceeds any further.

Mr. Peter Rees: We are standing on the beaches of an economic Dunkirk. My pretext for this very trite statement is that the inspiration comes from Mr. Jack Jones, and anything from Mr. Jack Jones deserves the deepest consideration from this House. The movement order from our beach, though it may have been written by the Chancellor, has behind it Mr. Jack Jones. Such experience as he has in this field he derives from the Ebro. I say that in no sneering spirit. He fought for his ideals.

Mr. Eric S. Heffer: A bit sooner than some of us.

Mr. Rees: I shall be interested to hear how the hon. Member reacts to recruiting mercenaries to fight on the Zambesi. I should like to know whether he supports that. If he does it is good news because so do I, whether it be on the Ebro or the Zambesi.

Mr. Tebbit: Is the pay taxable?

Mr. Rees: That we must discover.
But I doubt whether the experience Mr. Jones gained from the International Brigade is relevant to the situation of this country at the moment. Neither the Chancellor nor Mr. Jones has ever created anything in his life—not a nut, not a screw, not a car or anything. All they are doing is pursuing an obsessive hatred against management—[Interruption.] Perhaps the hon. Member for Liverpool, Walton (Mr. Heffer) would like to intervene. Perhaps he will tell us what he has created.

Mr. Heffer: The hon. and learned Gentleman seems to delight in attacking Mr. Jack Jones. When did the hon. and learned Gentleman ever work on the shop floor? When did he ever create a nut or a bolt or make any real contribution to the wealth of this country?

Mr. Rees: I am delighted to answer that question. I have never been privileged to work on the shop floor—

Mr. Heffer: Then do not attack those who have.

Mr. Rees: —but, because I have not done so, I am suitably diffident about attacking those who are responsible for creating the wealth of this country. The

hon. Member might pause and consider whether, however well or badly British management may have performed, if it has not invested sufficiently, it had the prospect of profits before it. Has it had the chance to invest profitably, and has the hon. Member used his considerable weight to make certain that such investment it has made has been put to good use? Has he made certain that machines which have been installed have been run properly and not overmanned? These are the kind of problems we should be focusing upon instead of the entirely irrelevant provisions in the Bill.
In an ideal world all salaries, perquisites and remunerations, whether in cash or kind, should be assessable to tax. The principle is easy to state, but we do not live in an ideal world. Our tax system is shot through with anomalies. Our taxes are too high. Remuneration of management is too low. What justification is there therefore for this further twist of the fiscal screw?
As many of my hon. Friends have pointed out, the clause will operate in a haphazard way. In a fair world why should a professional man who advises himself not be assessed to tax on the benefit of his advice? Why should the painter who paints his wife not be taxed on the value of the portrait? Why should not the coal miner who gets free coal be assessed upon that? Above all, why should not a Minister of the Crown who enjoys considerable perquisites not be assessed to tax on their value?

Mr. Arthur Lewis: Hear, hear.

Mr. Rees: I am glad to have a sympathetic response from at least one hon. Member. I hope he will go even further in his support and follow us into the Division Lobby.
I would never say that a Minister of the Crown was overpaid. I would not claim that even the Financial Secretary pursues his avocation for reward. I know that it is the scent of glory in his nostrils that keeps him on the Front Bench tonight. But is it right that Ministers should enjoy these perquisites and yet be outside the scope of the Bill?
I tabled two Questions recently in order to determine for the purposes of this


debate just what perquisites Ministers enjoy. Let me tell the Committee what they enjoy in the way of transport. Seventy-two chauffeur-driven cars are currently available for use by Ministers of the Crown—20 Rover 3·5s, 20 Wolseley 2200s, 31 Wolseley 6s and one Austin 2200. I wonder which Minister is relegated to the Austin? The answer goes on:
The current estimated cost of operating these vehicles is £760,000. This sum includes wages, overtime, insurance, superannuation, fuel, repairs and maintenance, depreciation, garaging, rates, security measures, administration, overheads and interest on capital employed. Ministers are not normally authorised to use official cars for private or domestic purposes other than for their own journeys between home or station or airport, and office within a limited area.
This is precisely the use of a company car which will constitute a perquisite within the provisions we are now debating. The answer goes on:
Exceptionally, wives or husbands of Ministers may also use cars for official or semiofficial purposes associated with their husbands' or wives duties."—[Official Report, 30th April 1976; Vol. 910, c. 197.]
What are semi-official purposes?
That is not the finish. I hope I am not boring the Committee but I also asked the Minister:
…for which Ministers of the Crown benefits are provided; if he will list the benefits under the following heads: living or other accommodation, entertainment, domestic or other services, the availability of the car for private use by himself or members of his family or household and other benefits and facilities of whatever nature.
The Committee may have noticed that I have used the exact phraseology contained in the Bill.

The information is revealing:

Living or other accommodation is traditionally provided as follows:

PRIME MINISTER: No. 10 Downing Street and Chequers.

CHANCELLOR OF THE EXCHEQUER: No. 11 Downing Street.

SECRETARY OF STATE FOR FOREIGN AND COMMONWEALTH AFFAIRS: No. I Carlton Gardens and Dorneywood.

LORD CHANCELLOR: A flat in the Palace of Westminster.

SECRETARY OF STATE FOR SCOTLAND�ž

"I hope the Scottish National Party Members are here—
Bute House, Edinburgh.

Three flats are provided in Admiralty House for ministerial use, and two are at present occupied by the Secretary of State for Defence and the Secretary of State for Northern Ireland.

That provides material for another question—why the Government should be so profligate as to keep one flat entirely empty.

It goes on:
Chequers, Dorneywood and Bute House are administered by trusts. Contributions from public funds are made to the upkeep of Chequers and Bute House.
Entertainment
Ministers are not personally provided with funds for entertainment, although £5,000 of the Prime Minister's salary is free of tax to meet expenses incurred in that office, including entertainment.

Mr. Heffer: Quite right, too.

Mr. Rees: "Quite right, too," the hon. Gentleman says, but what is sauce for the ministerial goose is also sauce for the managerial gander—[Interruption.] If the hon. Member tries to catch your eye later, Mr. Godman Irvine, no doubt you will look upon him with sympathy.

Mr. Heffer: The chairman of ICI is not the Prime Minister.

Mr. Rees: The chairman of ICI sometimes takes decisions of comparable magnitude.
The answer goes on:
The cost of official entertainment expenditure for Ministers is met either by the Government Hospitality Fund or through Departmental Votes.
Does it relate to buyers from overseas, I wonder? It will reassure hon. Gentlemen that no domestic service is provided from public funds:
No other benefits or personal facilities are provided for Ministers. It is not possible at present to segregate the costs relating to the residential and official uses of the accommodation provided."—[Official Report, 11th May 1976. Vol. 911, c. 132–3.]
I would respectfully suggest that the Ministers concerned had better apply their minds to this problem rather quickly. I put them on notice that I, and no doubt some of my hon. Friends, will be putting down an amendment in Committee upstairs to provide that directors for this purpose shall include Ministers of the Crown.
These provisions exhale the rank odour of Socialism. They demonstrate that once


again envy and meanness have been elevated into a principle of government.

10.15 p.m.

The Financial Secretary to the Treasury (Mr. Robert Sheldon): The hon. and learned Member for Dover and Deal (Mr. Rees) ended with a reference to the envy and meanness which he claimed motivated this Government in their proposals for benefits in kind. I noticed a certain amount of envy and meanness in some of his remarks, but I do not propose to dwell on those matters since we shall have the pleasure in Standing Committee of hearing the hon. and learned Member, who will presumably go further into the details. The main debates in these matters will be held in Standing Committee.
I have had put to me a number of questions. Perhaps I might deal with some of those of which I took note. I shall deal with others when we discuss the detailed provisions elsewhere. I can assure the hon. Member for Windsor and Maidenhead (Dr. Glyn) that retired employees will not be taxed on anything except loan waivers and stop-loss protection. I can assure the hon. Member for St. Ives (Mr. Nott) that home loans for amounts less than £25,000 are not affected by this legislation.
Strictly, of course, the hon. Member for St. Ives is right in saying that directors of charities are to be treated as directors, but I shall be giving this matter fuller consideration in those cases where anomalous results might be produced. Perhaps we can take this further on another occasion. On the aggregation point raised by the hon. Member for Chingford (Mr. Tebbit), a husband and wife will each have their own £5,000 limit.

Mr. Tebbit: The Minister will, of course, deal with my other point about aggregation of incomes coming to one person from more than one source.

Mr. Sheldon: I should like to take that further in our detailed discussion in Standing Committee.

Mr. John Peyton: Why not deal with it now?

Mr. Sheldon: The right hon. Gentleman may not realise it, but this is a debate on Clause 52, which was selected by the Opposition. It does not cover

the other six or seven clauses which have been mentioned during this debate and which, if one dealt with them, would detract from much of the further detailed discussion which it is the purpose of this procedure to protect.

Mr. Peyton: It is an extraordinary argument that points made by my hon. Friends, not ruled out of order and sounding perfectly legitimate, should be waved to one side by the Minister on the ground that they will be discussed in Standing Committee. Why in the name of conscience should Ministers not answer points which have been fairly made in the Chamber, particularly those which embarrass them because they deal with intolerable privileges given to Ministers under the Bill?

Mr. Sheldon: I understand the right hon. Gentleman wanting to say something as soon as he arrives in the Chamber, but if we were to behave strictly according to the rules of order, these matters should not even be raised, let alone in the way they have been. [HON. MEMBERS: "Oh."] Hon. Members who understand the Finance Bill provisions know that many of the points raised this evening arise under Clauses 53, 54, 55 and 56 and that it is only right that we should deal here with the broad principle underlying the legislation, to which adequate scrutiny needs to be given. I intend to reply to the many points that were put while the right hon. Member for Yeovil (Mr. Peyton) was not present. Unfortunately, he did not have the opportunity of hearing the wide-ranging debate to which it is my privilege to reply in as much detail as time will permit.
The hon. Member for Chertsey and Walton (Mr. Pattie) said that no one liked fringe benefits. This comment was echoed and re-echoed from the Opposition Benches throughout the debate. The hon. Member for Kingston-upon-Thames (Mr. Lamont) said that ideally all benefits in kind should be taxable, and the hon. Member for Windsor and Maidenhead repeated that sentiment in almost the same words. The hon. Member for St. Ives said that in equity all benefits should be taxed together with income. No one had much of a good word to say for fringe benefits.
The main difference between the Opposition and the Government is that


the Opposition dislike fringe benefits and are prepared to do nothing about them because of the obvious problems, but the Government face those problems and have introduced this legislation which it is my job to defend and explain.
Several hon. Gentlemen raised the question of the treatment of cheap airline travel as a benefit in kind, in particular the hon. Members for Uxbridge (Mr. Shersby), Twickenham (Mr. Jessel), Windsor and Maidenhead, Surrey, North-West (Mr. Grylls) and Chingford (Mr. Tebbit).

Mr. Lawson: Does the Minister concede that under the Labour Government the incidence of fringe benefits has increased considerably as a direct result of the taxation and incomes policies followed by the Government?

Mr. Sheldon: Precise information on broad general issues such as that is hard to obtain, but I think the hon. Gentleman's impression is probably the same as mine, that the incidence of fringe benefits has been increasing in Britain over the past 20 years, or perhaps more, and the time has clearly come when fringe benefits need to be taxed in the same way as other emoluments.
Hon. Gentlemen put a number of questions about airline concessionary travel. I was asked about the assessment of the value received by the individual. I fully accept, as the hon. Member for Surrey, North-West said, that the value of the concessionary airline ticket is not the same as the value of a ticket sold to the public because of the limitations placed upon its use. We intend to take account, in assessing the benefit of cheap airline travel, of the fact that employees may be off-loaded or otherwise delayed or inconvenienced, and the benefit at arm's length—plainly less than that of a full fare—will be the subject of negotiation between the airlines and the Inland Revenue. The legislation gives us a fair amount of time—until 1977–78, when it comes into force—for the consultations and discussion I have mentioned.

Mr. Kenneth Lewis: Is the right hon. Gentleman also proposing to discuss with the National Union of Mineworkers and the National Coal Board the assessment of the value of the coal concession

to the miners, some of which is sold by the miners?

Mr. Sheldon: I shall come to that in due course.
Several hon. Gentlemen put to me the necessity to treat the private sector and the public sector in the same way, and I fully agree with that.
The hon. Member for Kingston-upon-Thames mentioned living accommodation occupied by Ministers and those in the public service. The hon. Member for St. Ives also dealt with that aspect of the problem and thought that the concept of representative occupation was, to use his words, a fiddle. Since 1948 the statutory provision concerning representative occupation has applied to directors and higher-paid employees. It first applied to those with incomes above £2,000 and more recently to those with incomes of more than £5,000. The provision in relation to employees goes back to cases in the last century when a distinction was drawn between a representative and a beneficial occupation. We shall be dealing with the details in Standing Committee.
A case has recently been decided in the High Court affecting the general position of representative occupation. It concerned a police officer who was held by the Court to be in representative occupation of a police house 20 miles away from where he was serving as a member of the regional crime squad. The judgment was given on 1st April this year, and I have not yet had the pleasure of seeing it. I understand that it has not yet been published, but clearly because of its impact on this legislation I shall consider the matter in more detail when it is published. The case throws up some possibility of a need for changes in the definition of representative occupation.
I shall be setting up an interdepartmental review into the distinction between representative and beneficial occupation. It will cover all the cases mentioned in this debate. It will cover persons with more than £5·000 a year and those with less than that sum; it will cover the public and private sectors as well as the directors of companies and others. Since the provisions of the Finance Bill will not come into effect until 1977–78 there will be time to incorporate any changes aris-


ing from this review as from the same date.
I turn to the subject of miners' concessions—a matter which appears to interest some Conservative Members. There are a number of extrastatutory concessions which are published and in which the practice has grown up that tax is not paid. The three extrastatutory concessions that come to mind include miners' coal, luncheon vouchers and directors with less than 5 per cent. shareholdings. We do not intend to change any extra-statutory concessions in so far as they affect benefits in kind.
The hon. Member for St. Ives mentioned National Coal Board employees who in the past occupied their houses as representative occupiers. If they have done so on that basis, they will continue to do so, and if they have previously been treated as beneficial occupiers, they will pay the relevant amount of tax in future as they have in the past.
I turn to the proposals dealing with motor cars. I should also like to deal with ministerial cars and the benefits in that respect. The hon. Member for St. Ives quoted a number of letters from constituents or members of the public who apparently find the present arrangement satisfactory in those cases where benefits are agreed between the taxpayer and the inspector.
With due deference to the hon. Gentleman, I believe that the arrangement between the tax inspector and the taxpayer does not allow for the close investigation of the benefit received. What we know happens in many cases is that the person receiving a benefit will make one claim and the inspector will have a struggle with him, but we also know that there is no adequate basis of assessment as to the amount to be paid.
10.30 p.m.
This is the weakness of the present system, that the inspector is virtually confined to a haggle without information. The hon. Member for St. Ives talked about the arbitrary assessment of the new scheme. I can think of nothing more arbitrary than the way this is done at present. In assessing the proportion of private benefit that is obtained by the taxpayer, the Revenue is hopelessly uninformed as to the basis on which it may

finally settle an agreed figure. What we are now to have is a modest charge.
When we think of the amount of benefit we must think not of those people with cars that are owned and provided by their companies, but of the millions of people who out of their own taxed resources, provide their own cars, together with the cost of running them and all the standing charges connected with them. That must be borne in mind in considering the modest proposal that is provided for in the Bill. There is a string feeling among those who provide their own cars, who go to great lengths in sacrificing their other requirements to maintain a car, about the advantages that some others have been able to acquire by means of cars provided by their companies.

Mr. Peter Rees: The Minister has told us that the Inland Revenue is short of information to determine these important points. Could it not be that as a result of the debate we had on the provisions of Schedule 6 the Revenue will soon be armed with provisions which will enable it to get any information it requires on this or any other relevant subject?

Mr. Sheldon: I do not propose to go over that lengthy debate once more. That subject was pretty well exhausted and I noted the contribution of the hon. and learned Gentleman.
I not the concern expressed by a number of hon. Members concerning ministerial cars and the benefits Ministers are supposed to have from the arrangement for pool cars. Pool cars are fundamentally different from other cars provided by companies. I will explain the difference. I have a pool car. [Interruption.] If the hon. Gentleman will allow me I will explain the limitations upon me as a Minister in respect of my pool car. Any Minister has to observe such limitations. The care is not available to him in the same way as a car owned by a company and let to its employee is available.

Mr. Peter Rees: Why not?

Mr. Sheldon: It is not. That is the reality of the situation. The car is not available to a Minister for holidays, weekend pleasure travel and so on. How many Ministers have been in a position


to give up their own cars? I and most of the Ministers I have spoken to on this retain their own cars simply because the pool car is not available for so many journeys which they consider essential to their duties.
Some hon. Gentleman have been talking about Ministers having slinky limousines. My pool car is an 1800 Wolseley—hardly a slinky limousine. My private car is not so modest and is more high-powered. I pay in full for its maintenance and upkeep generally. I understand the anger of Opposition Members about the problem as it affects them and their constituents. They are seeking desperately to show that there are areas of privilege for Ministers. if they consider this carefully they can see that our privilege is circumscribed.

Sir Paul Bryan: When will the hon. Gentleman come down to earth? Does a lady Minister never use her car to go to the hairdresser?

Mr. Sheldon: On the way to an appointment that is possible, I suppose. [Laughter.] Hon. Members opposite are scratching very hard tonight, they really are, especially when one considers that in a company car people can go on visits to the Continent on holiday travel—indeed, one sees a lot of company cars over there. I am not denying those concerned such private benefits. All I am saying is that such benefits should have some relevance to the tax payable.

Dr. Jeremy Bray: Surely hon. Members opposite can get the answer about hairdressing appointments from the Leader of the Opposition's use of her official car.

Mr. Sheldon: That is an interesting point but I leave it to the Opposition to take up.
The self-employed are not covered by this provision. We have introduced it to come into effect in 1977–78. We believe that benefits in kind are part of the emoluments of a person. The Opposition and the Government share that view; the difference is that we have decided to do something about it. But we understand the problems.

Mr. Esmond Bulmer: What estimate have the Government

made of the effect on British Leyland of this proposal? Does the hon. Gentleman realise that 90 per cent. of companies buy British? Under this proposal, it will be up to individuals to buy their cars and there will be a significant shift to foreign cars.

Mr. Sheldon: My right hon. Friend and I will be meeting representatives of the car industry on Wednesday in one of what may be a series of meetings and consultations. The provision does not come into force until 1977–78, so there is plenty of time for consultation. These benefits are part of the emoluments and income of a person and they should be taxed not only in principle, as the Opposition say, but in practice as well. We believe both in the principle and in the practice. We shall listen to representations, but we believe that this is a valuable provision.

Mr. Arthur Lewis: I accept what my hon. Friend says about the fairness of this tax, but can he explain the logic or fairness of the fact that Back Benchers who go home in their own cars will, if they claim any allowance, be taxed on it, quite rightly, whereas a Minister, who has been here doing the same sort of work, gets his transport home tax-free?

Sir John Hall: The Minister has not told us why this provision is aimed entirely at directors and those earning over £5,000 a year.

Mr. Sheldon: The problem with the director is that he has a control over his own emoluments and over parts of the benefits he receives. He has representation on the board that is not open to the employee. That aspect is already covered in legislation.

Mr. Nott: Nonsense.

Mr. Sheldon: The hon. Gentleman says "Nonsense", but he will know that this is a matter which has been on our statute book for 28 years. Many of his hon. Friends and himself have had plenty of time to alter this general provision during that period. The provision applying to directors has been part of our legislation through many Governments over all those long years. If the hon. Gentleman is now prepared to disown it, let him say so and seek to repeal it. He did not take that opportunity before, and I do not see why he should take it again.
On the question of ministerial cars, my hon. Friend the Member for Newham, North-West (Mr. Lewis) may not have heard the detailed explanation about pool cars as opposed to company cars.
As to the £5,000, this was an increase on the previous level of £2,000, and these levels are always subject to review at any time.

Mr. Nott: It really is a gross impertinence of the Financial Secretary to excuse himself from answering the majority of questions asked in the debate by saying that much of what was said was outside the terms of the clause.
Clause 52 is the widest clause, headed "General provision charging benefits". If the Financial Secretary had read the clause he would know that every single question posed to him was in order, and he has answered virtually none of them. If he finds his own legislation rather confusing, he has our sympathy, but the Government are bringing forward this Bill to codify and modify benefits in kind, and the Government are therefore under an obligation to answer the questions put by my hon. Friends.
The most authentic note in the debate was probably sounded by the hon. Member for Ealing, Southall (Mr. Bidwell), who is not here at the moment. He intervened earlier and said that the shop stewards at London Airport did not oppose the principle of taxing benefits. They just did not like the way that it affected them. Precisely. I have great sympathy with the shop stewards at London Airport and the people they represent. They are in favour of the principle but do not like the way it affects them.
The Financial Secretary mentioned his own car. The Chancellor of the Exchequer is bringing forward this legislation. He likes it in principle but it does not affect him. The hon. Member for Newham, North-West (Mr. Lewis) made a very valuable point. The fact of the matter is that employees in this country, whatever they earn, cannot claim back from the tax man the cost of their travel to and from work. Why is it that Ministers driving pool cars can travel backwards and forwards to work and that this is not a taxable benefit? The Financial Secretary has not answered that point.

That was one of many questions that I asked him. Does not he always use the same driver and the same car?

Mr. Robert Sheldon: It varies. There are occasions when the car goes in for service—[Interruption.] There are occasions when the car—[Interruption.] Before the hon. Gentlemen get so excited, perhaps I can tell them something about the Government car service which they do not know. I get a different car once or twice a week. What I have provided for me is a car.

Mr. Nott: If the Financial Secretary has to change his car occasionally because it breaks down, that is understandable enough, but the Chancellor of the Exchequer and most senior Ministers have the same driver and the same car each time. By no possible stretch of the imagination can those cars be described as pool cars. They are certainly not pool cars in any way in which the layman would understand the term.

Mr. Robert Sheldon: During the years 1970–74, the same position applied to cars as that which applies now. The hon. Gentleman was happy with the arrangement whereby he came from his place of residence to his office and was not taxed, in contrast to other people, and he did nothing about it. The difference now is that we are trying to get it on to a sensible basis.

10.45 p.m.

Mr. Nott: There is no difference at all. The only fundamental change is that the Government themselves are bringing forth this legislation to codify the law. If the Government put legislation in the Bill, they must justify it to the House.
I shall not repeat what I said in opening this debate, but anyone reading Hansard tomorrow will see that I discussed at some length the concept of representative occupation. The Financial Secretary has made some reference to the Conservative administration. I well remember when the then Chancellor of the Exchequer was offered Chevening, in Kent, as a house for the Chancellor. Lord Barber, the then Chancellor, turned it down because he would have been taxed on the occupation of Chevening as a benefit in kind, and he felt that he could not bring forward legislation to exempt himself from tax. For that


reason, Chevening is not now occupied by the Chancellor of the Exchequer—

Mr. George Cunningham: Chevening was accepted by the then Government.

Mr. Nott: It was not accepted by Lord Barber, and that is why it is not occupied by the Chancellor. But why the difference between one Government house and another? In Committee upstairs we shall want to go into this in great depth. The Chancellor does not work at No. 11 Downing Street. It is not essential that he lives there for the purpose of carrying out his job. He works in the Treasury.
This difficulty has arisen because of the oppressive tax rates imposed by the Government. None of this could arise if the rates of tax on higher incomes had not been raised to 83 per cent. for earned income by this Government. The problem arises because of the way that taxation has risen to penal levels under this Government. It is no use the Financial Secretary saying that the Government are a bit concerned about this, so they have set up an interdepartmental committee headed by the Inland Revenue to consider the difference between beneficial and representative occupation.
Are we living in a dream world? The Government bring forward legislation to change the basis and codify it. Then, in presenting the legislation, they tell us that an interdepartmental committee has been set up within the Civil Service to consider the principles. Why was not it done before the legislation was brought forward?
My hon. Friend the Member for Kingston-upon-Thames (Mr. Lamont) made the point that private school boarding allowances for diplomats were untaxed. Earlier, when we were discussing the Chancellor being untaxed, the hon. Member for Liverpool, Walton (Mr. Heffer) shouted "Quite right, too." Does he think it quite right that members of the Foreign Office should be allowed to send their children to Eton, Harrow and other distinguished schools and not be taxed on the benefit?
I have a Parliamentary Answer before me. I could not believe that it was correct, and that is why I intervened in the speech of my hon. Friend the Member for Kingston-upon-Thames. I have friends in the Services, and I am quite

sure that they pay tax on the benefits which they obtain from sending their children to private schools. But, according to this Parliamentary Answer, Foreign Office officials do not pay. Why? Is it because it is abroad? It was the Government who changed the basis of overseas income, taxation and benefits. It was this Government who brought forward the legislation. Why should diplomats be excluded'? Why should they receive a non-taxable benefit in sending their children to private schools? An employee who contributes to a private health scheme in his firm will be taxed on the benefit. How petty! Yet our ambassador in Paris can send his child to a leading public school and no tax is paid. It is "two nations ". The Financial Secretary will not be able to get away in Committee with that sort of speech he made tonight.
We are not so much concerned with the ambassador in Paris and his perks as with the hundreds of thousands of salesmen who necessarily use their cars for work and who will now pay extra tax. I am talking about people on £90 a week, not rich people or highly paid occupations. These salesmen will pay more in extra tax than the £4 they receive under the Chancellor's prices and incomes policy. What justice is there in that? These are the people the Chancellor said he wanted to help.
Hon. Members will remember the row which was caused when the Inland Revenue published a notice on the taxation of the compensation received by transport drivers when they stayed away overnight. The TG and WU was up in arms about it. Now most transport drivers will be brought in, as will airline staff, to whom a number of my hon. Friends have referred, and commuters, who are one of the most had-pressed sectors of the community. Commuters will be taxed on the miserable little loans which enable them to buy season tickets, and some now have to pay £600 or £700 for a season ticket. Is this higher-paid employment? Not a bit of it. These are people earning between £80 and £100 a week. The highest marginal rate of tax increase will be for those earning just under £100 a week. When the benefits are added, they will go over the top.
The Financial Secretary has said he will make changes in the proposals as


they relate to charities, but why did he not realise that people running charities on salaries of £1,000 a year would have to pay tax on the benefit of having a car? It is clear that this would have been the position.
What about railwaymen? I have had hundreds of letters from railwaymen all over the country. I shall pass them to the Chief Secretary. He can count them. I am glad that, with his background, he can count.
I asked earlier how railwaymen would be assessed, but I did not receive an answer. The only answer we received from the Financial Secretary was that the proposal did not apply to home loans up to £25,000. But I never asked about that. I asked what would happen to a loan provided by an employer to an employee. The beneficial element in the interest will be taxed if the employee earns over £5,000. [Interruption.] The Chief Secretary says "No". Perhaps I am wrong.

Division No. 140.]
AYES
[10.55 p.m


Anderson, Donald
Davis, Clinton (Hackney C)
Jay, Rt Hon Douglas


Archer, Peter
Deakins, Eric
Jenkins, Rt Hon Roy (Stechford)


Armstrong, Ernest
Dean, Joseph (Leeds West)
John, Brynmor


Atkins, Ronald (Preston N)
Dempsey, James
Johnson, James (Hull West)


Bagier, Gordon A. T
Doig, Peter
Johnson, Walter (Derby S)


Bain, Mrs Margaret
Dormand, J. D
Jones, Barry (East Flint)


Barnett, Rt Hon Joel (Heywood)
Duffy, A. E. P
Judd, Frank


Bates, Alf
Eadie, Alex
Kilroy-Silk, Robert


Bean, R. E
Edge, Geoff
Lamond, James


Bennett, Andrew (Stockport N)
Edwards, Robert (Wolv SE)
Latham, Arthur (Paddington)


Bidwell, Sydney
Ellis, Tom (Wrexham)
Lewis, Ron (Carlisle)


Bishop, E. S
Ennals, David
Lipton, Marcus


Blenkinsop, Arthur
Evans, Gwynfor (Carmarthen)
Loyden, Eddie


Boardman, H
Evans, loan (Aberdare)
Luard, Evan


Bottomley, Rt Hon Arthur
Ewing, Harry (Stirling)
McCartney, Hugh


Boyden, James (Bish Auck)
Ewing, Mrs Winifred (Moray)
MacCormick lain


Bradley, Tom
Faulds, Andrew
McElhone, Frank


Bray, Dr Jeremy
Fernyhough, Rt Hon E
Macfarquhar, Roderick


Brown, Hugh D. (Proven)
Fletcher, Raymond (Ilkeston)
McGuire, Michael (Ince)


Brown, Robert C. (Newcastle W)
Fletcher, Ted (Darlington)
Mackenzie, Gregor


Brown, Ronald (Hackney S)
Foot, Rt Hon Michael
Mackintosh, John P


Buchan, Norman
Ford, Ben
McMillan, Tom (Glasgow C)


Buchanan, Richard
Forrester, John
McNamara, Kevin


Callaghan, Rt Hon J. (Cardiff SE)
George, Bruce
Madden, Max


Campbell, Ian
Gilbert, Dr John
Magee, Bryan


Canavan, Dennis
Ginsburg, David
Mallalieu, J. P. W


Carmichael, Neil
Golding, John
Marquand, David


Clemitson, Ivor
Gould, Bryan
Marshall, Dr Edmund (Goole)


Cocks, Michael (Bristol S)
Graham, Ted
Maynard, Miss Joan


Cohen, Stanley
Grocott, Bruce
Mendelson, John


Coleman, Donald
Hamilton, James (Bothwell)
Miller, Dr M. S. (E Kilbride)


Colquhoun, Ms Maureen
Harper, Joseph
Miller, Mrs Millie (Ilford N)


Concannon, J. D
Harrison. Walter (Wakefield)
Mitchell, R. C. (Solon, Itchen)


Conlon, Bernard
Hart, Rt Hon Judith
Molloy, William


Cox, Thomas (Tooting)
Hatton, Frank
Morris, Charles R. (Openshaw)


Craigen, J. M. (Maryhill)
Henderson, Douglas
Moyle, Roland


Crawford, Douglas
Horam, John
Noble, Mike


Crawshaw, Richard
Howell, Rt Hon Denis
Ogden, Eric


Cronin, John
Huckfleld, Les
O'Halloran, Michael


Crosland, Rt Hon Anthony
Hughes, Robert (Aberdeen N)
O' Halloran, Michael


Cunningham, G. (Islington S)
Irvine, Rt Hon Sir A. (Edge Hill)
Orbach, Maurice


Davidson, Arthur
Irving, Rt Hon S. (Dartford)
Ovenden, John


Davies, Bryan (Enfield N)
Jackson, Colin (Brighouse)
Padley, Walter


Davies, Denzil (Llanelli)
Jackson. Miss Margaret (Lincoln)
Palmer, Arthur

What about those occupying accommodation in educational establishments —those in the polytechnics and universities? They may be earning £80 or £90 a week. They will come into tax.

We have debated this matter at length. We must bring it to a close. This legislation, unknown to the country, will bring hundreds of thousands of unsuspecting and unknowing citizens into tax for benefits in a way that they do not begin to understand or contemplate. As we debate this legislation we are in the middle of a new prices and incomes negotiation which the Government are trying to get accepted by the trade unions. It is a gross error of political judgment to try to bring forward this sort of codifying legislation at this time. The Government will be made to look foolish. I must advise my right hon. and hon. Friends to vote against the clause.

Question put, That the clause stand part of the Bill:—

The Committee divided: Ayes 195, Noes 166.

Question accordingly agreed to.

Park, George
Short, Rt Hon E. (Newcastle C)
Walker, Harold (Doncaster)


Parry, Robert
Siliars, James
Walker, Terry (Kingswood)


Pavitt, Laurie
Silverman, Julius
Ward, Michael


Pendry, Tom
Skinner, Dennis
Watkins, David


Phipps, Dr Colin
Small, William
Weitzman, David


Prentice, Rt Hon Reg
Smith, John (N Lanarkshire)
White, Frank R. (Bury)


Prescott, John
Snape, Peter
White, James (Pollok)


Price, William (Rugby)
Spearing. Nigel
Whitlock, William


Radice, Giles
Spriggs, Leslie
Wigley, Dafydd


Reid, George
Stallard, A. W.
Williams, Alan (Swansea W)


Richardson, Miss Jo
Stewart, Donald (Western Isles)
Williams, Sir Thomas


Roberts, Albert (Normanton)
Stott, Roger
Wilson, Alexander (Hamilton)


Robertson, John (Paisley)
Strang, Gavin
Wilson, Rt Hon H. (Huyton)


Robinson, Geoffrey
Taylor, Mrs Ann (Bolton W)
Wilson, William (Coventry SE)


Roderick, Caerwyn
Thomas, Jeffrey (Abertillery)
Wise, Mrs Audrey


Rooker, J. W.
Thomas, Ron (Bristol NW)
Woodall, Alec


Roper, John
Thompson, George
Woof, Robert


Ross, Rt Hon W. (Kilmarnock)
Thorne, Stan (Preston South)
Young, David (Bolton E)


Rowlands, Ted
Tierney, Sydney



Sandelson, Neville
Tinn, James
TELLERS FOR THE AYES:


Sedgemore, Brian
Torney, Tom
Mr. David Stoddart and


Shaw, Arnold (Ilford South)
Wainwright, Edwin (Dearne V)
Mr. John Ellis


Sheldon, Robert (Ashton-u-Lyne)
Walden, Brian (B'ham, L'dyw'd) 


NOES


Adley, Robert
Hayhoe, Barney
Page, Rt Hon R. Graham (Crosby)


Aitken, Jonathan
Hicks, Robert
Pardoe, John


Amery, Rt Hon Julian
Higgins, Terence L.
Parkinson, Cecil


Arnold, Tom
Holland, Philip
Penhaligon, David


Atkins, Rt Hon H. (Spelthorne)
Hordern, Peter
Percival, Ian


Banks, Robert
Howell, David (Guildford)
Peyton, Rt Hon John


Beith, A. J.
Howells, Geraint (Cardigan)
Price, David (Eastleigh)


Benyon, W.
Hunt, David (Wirral)
Prior, Rt Hon James


Berry, Hon Anthony
Hunt, John
Pym, Rt Hon Francis


Biffen, John
Hurt, Douglas
Rathbone, Tim


Body, Richard
Hutchison, Michael Clark
Rees, Peter (Dover amp; Deal)


Boscawen, Hon Robert
Jenkin, Rt Hon P. (Wanst'd amp; W'df'd)
Rees-Davies, W. R.


Brittan, Leon
Jessel, Toby
Renton, Rt Hon Sir D. (Hunts)


Brown, Sir Edward (Bath)
Johnson Smith, G. (E Grinstead)
Renton, Tim (Mid-Sussex)


Bryan, Sir Paul
Kershaw, Anthony
Rhys Williams, Sir Brandon


Budgen, Nick
Kilfedder, James
Rippon, Rt Hon Geoffrey


Bulmer, Esmond
Kimball, Marcus
Roberts, Michael (Cardiff NW)


Chalker, Mrs Lynda
King, Evelyn (South Dorset)
Roberts, Wyn (Conway)


Channon, Paul
King, Tom (Bridgwater)
Rossi, Hugh (Hornsey)


Churchill, W. S.
Kitson, Sir Timothy
Sainsbury, Tim


Clark, Alan (Plymouth, Sutton)
Knight, Mrs Jill
Shelton, William (Streatham)


Clarke, Kenneth (Rushcliffe)
Knox, David
Shepherd, Colin


Clegg, Walter
Lamont, Norman
Shersby, Michael


Cockcroft, John
Langford-Holt, Sir John
Silvester, Fred


Cooke, Robert (Bristol W)
Lawson, Nigel
Sims, Roger


Cope, John
Le Merchant, Spencer
Sinclair, Sir George


Davies, Rt Hon J. (Knutsford)
Lester, Jim (Beeston)
Skeet, T. H. H.


Dean, Paul (N Somerset)
Lewis, Kenneth (Rutland)
Smith, Dudley (Warwick)


Dodsworth, Geoffrey
Lloyd, Ian
Speed, Keith


Drayson, Burnaby
Loveridge, John
Spicer, Michael (S Worcester)


Dykes, Hugh
Luce, Richard
Stainton, Keith


Eden, Rt Hon Sir John
Macfarlane, Neil
Stanbrook, Ivor


Edwards, Nicholas (Pembroke)
Macmillan, Rt Hon M. (Farnham)
Steel, David (Roxburgh)


Elliott, Sir William
Marten, Neil
Steen, Anthony (Wavertree)


Farr, John
Maude, Angus
Stradling Thomas, J.


Fell, Anthony
Maudling, Rt Hon Reginald
Tapsell, Peter


Finsberg, Geoffrey
Maxwell-Hyslop, Robin
Taylor, R. (Croydon NW)


Fisher, Sir Nigel
Mayhew, Patrick
Taylor, Teddy (Cathcart)


Fletcher, Alex (Edinburgh N)
Meyer, Sir Anthony
Temple-Morris, Peter


Fookes, Miss Janet
Miller, Hal (Bromsgrove)
Thomas, Rt Hon P. (Hendon S)


Forman, Nigel
Mills, Peter
Tugendhat, Christopher


Fowler, Norman (Sutton C'f'd)
Mitchell, David (Basingstoke)
Wainwright, Richard (Coins V)


Freud, Clement
Moate, Roger
Wakeham, John


Gardiner, George (Reigate)
Monro, Hector
Welder, David (Clitheroe)


Glyn, Dr Alan
Moore, John (Croydon C)
Walters, Dennis


Gorst, John
More, Jasper (Ludlow)
Weatherill, Bernard


Gower, Sir Raymond (Barry)
Morgan, Geraint
Whitelaw, Rt Hon William


Gray, Hamish
Morrison, Charles (Devizes)
Wiggin, Jerry


Griffiths, Eldon
Morrison, Hon Peter (Chester)
Winterton, Nicholas


Grimond, RI Hon J.
Mudd, David
Wood, Rt Hon Richard


Grist, Ian
Nelson, Anthony
Young, Sir G. (Ealing, Acton)


Grylls, Michael
Newton, Tony
Younger, Hon George


Hall, Sir John
Normanton, Tom



Hall-Davis, A. G. F.
Noll, John
TELLERS FOR THE NOES:


Hamilton, Michael (Salisbury)
Oppenhelm, Mrs Sally
Mr. Carol Mather and


Hampson, Dr. Keith
Osborn, John
Mr. John Corrie.


Harvie Anderson, Rt Hon Miss
Page, John (Harrow West)

Clause 52 ordered to stand part of the Bill.

Clause 64

RELIEF FOR BUSINESS PROPERTY

Question proposed, That the clause stand part of the Bill.

Mr. David Howell: This clause governs Schedule 10, which we shall debate in detail in Committee upstairs over the next few weeks. Our purpose in having this short debate is to draw attention to the posture that the Government have taken up in relation to capital transfer tax, and I am glad to see not only the Chief Secretary and the Financial Secretary in their seats but also the former Financial Secretary who played such a part in these affairs and whose Gilbert and Sullivan clause proved such a mystery to those who had to operate the tax and discover what on earth the whole thing was about.
There is a great deal of irony in this clause, for one simple reason. In February 1975 we were told that the concessions embodied in the clause and the schedule were impossible. We were told at great length by the present Financial Secretary, the previous Financial Secretary, the present Chief Secretary, and, in his own inimitable and boorish way, the Chancellor of the Exchequer, when he condescended to join in these debates, that these things could not be done, that the concessions for which we asked, or even a part of them, were impossible.
We were told that we did not understand how the capital transfer tax would apply to small businesses, and therefore when we suggested that the rates should be lowered or the valuation principles should be altered so that the tax would bite less harshly into small businesses, we were condemned as being unable to face the realities of what this tax really meant.
Every conceivable word was thrown at us. We were described as "hysterical" by the Chancellor. It was said that we were exaggerating the true facts. The Chief Secretary said again and again that it was pointless our asking for amendments of this kind, because they would apply to all small companies. He said that if we benefited all small companies it would imply that they were all good, and he knew that there were many badly managed small companies. The Chief Secretary used many other quite strong words for him, but they were nothing

compared with the vituperation we had from the Chancellor at the Report stage.
That is the irony behind this clause. A year after all that, some of those things are being done—at least in part. It would have been very much simpler for the Chief Secretary to have listened to us in the first place. But he did not listen because he thinks that he alone understands the intricacies of the tax. If only he had listened to us he would have saved himself a great deal of trouble and a great many difficulties in tax administration. There are great difficulties facing small firms which have been, during the year, facing the prospect, if a transfer has taken place in a lifetime, of very heavy tax charges.
During the Budget debate, the Chancellor said in a characteristically unattractive way that although all the objections to the capital transfer tax when it was first introduced in November-February 1974–75 merely proved what a good tax it was, nevertheless he had come to the conclusion that certain reliefs should be introduced now. The way he mentioned this in the Budget is interesting, and it demonstrates his difficulty in understanding what it is all about. He said:
The lengthy and acrimonious debates which accompanied the introduction of Capital Transfer Tax revealed how important these avoidance possibilities have been, since despite the fact that the new tax is levied at far more moderate rates than the old estate duty, it produced far more hostility among those whom it affected."—[Official Report, 6th April, 1976; Vol. 908–9, c. 264.]
If the Chancellor had listened to the debates a year before, he would have realised that the main aim of our hostility was preventing the taxes being charges at the levels proposed on small firms and partnerships throughout the country, whose levels of productive activity would be threatened had the tax been applied at the rates which emerged from the 1975 Finance Bill. If he had listened he would have realised what our hostility was all about. He is completely wrong about where our real opposition to this measure lies.
We have this concession involving the 30 per cent. reduction in the value transferred in the case of a sole proprietor, or partnership business, or a controlling shareholding in an unquoted company, and 30 per cent. relief also applying to farmers, separate from the 50 per cent.


relief which will be quoted, and the multiple rental formula which existed in capital transfer tax as it was on the statute book before. That may sound like a major advance. It is certainly in line with the points we made again and again in the debate on the capital transfer tax. Those points were rejected as impossible, irresponsible, unnecessary and based on misunderstanding and so on. The Government must now eat them words.
11.15 p.m.
This provision may be a move in the right direction, but it is pretty small beer. Things begin to look less rosy when the scale rates of CTT set out in the first Finance Act 1975, with their effect on a transfer by an individual after 26th March 1974, are compared with the movement in the retail prices index since that date. On that date the index stood at 102·6. On 16th March 1976 it was 150·6—a rise of 46·8 per cent.
Consider the position of an unquoted £100,000 business. That is not a large enterprise. It is not unreasonable to assume that the price of the assets in it would have risen by about the same rate as prices, which would make it now worth about £147,000. If we reduce that by 30 per cent., which is the new concession, we arrive back at a CTT valuation of £102,000. That means that the concession is inadequate to compensate for inflation.
The Chief Secretary has therefore made a very small move which he swore 18 months ago was impossible. But we still believe that the tax is deeply objectionable and we shall be voicing our objections in due course. There is still no exemption for families in regard to this kind of transfer, the sort of exemption which operates in practically every other Western country. We are still left with some of the highest rates of capital taxation in the Western world. Capital is still concentrated in the hands of the State and no attempt is made at broadening the ownership of capital. Above all, the tax is a wrecker of jobs at a time of high unemployment. It contributes not to the creation but to the postponement of jobs, not to investment in new equipment but to the postponement of investment. It stifles innovation and kills the enterprise which flows from small companies and similar enterprises in the economy.
For those reasons we look at the concession without great enthusiasm. It takes us back to roughly where we were when all the trouble over the CTT began. We must go a great deal further before we begin to approach a sensible structure of business taxation which is commensurate with the needs of the economy in what we hope will be our economic recovery.

Mr. Lawson: I had not intended to intervene in the debate but I was prompted to do so by the presence on the Treasury Bench of the Minister for Transport, the former Financial Secretary. I never thought that the idea of having him back in the Treasury team would appeal to me. But after listening to his successor replying to the last debate I really felt that he ought to come back. It is good to see him now, the criminal revisiting the scene of his crime, only, in a rather curious way, he has found that his fellow conspirators are returning some of the loot—not all of it, but that is what part of the Bill is about.
It is perhaps with some anguish that the hon. Gentleman has had to sit by and watch it happen. This clause is one of many capital transfer tax clauses in the Bill. Out of 105-odd clauses in the Bill there are 42 capital transfer tax clauses. Of these only one is repealing another clause, so there is a net gain, as it were, of 41 new capital transfer tax clauses.
When the capital transfer tax was introduced we had only 31 clauses on the whole subject, but we now have another 41. It is an astonishing story of Government ineptitude, because each of these clauses is, to some extent, yielding to points we made at all hours day after day and night after night in Committee upstairs. I take the one we are now debating as an example, but it is an example which applies to them all. This is giving an abatement of 30 per cent. to businesses.

Mr. Joel Barnett: Got it.

Mr. Lawson: The Chief Secretary says "Got it". The trouble is that the Chief Secretary himself had not got it when we proposed this in the last Finance Bill but one. For example, the Chief Secretary on 5th February in Standing Committee A was saying it would be


"wholly wrong" to use the abatement system for helping businesses. He said:
Assuming that to be the right thing to do in terms of helping the company, it would be the wrong thing to do in terms of fiscal privilege between two different taxpayers. If one taxpayer has £250,000 in ICI and another taxpayer has £250,000 in a small company, I cannot see why, in terms of equity, one should pay less tax than the other… I cannot see how it can be fair to give relief to one man who happens to own betting shops, or a small manufacturing company, but not another who has shares in an equally good but quoted company."—[Official Report, Standing Committee A, 5th February 1975; c. 773.]
We went on day after day, night after night, trying to demonstrate to the Chief Secretary that there was some difference between being a proprietor of a little business and having a large number of shares in ICI, and that there was a difference betwen the portfolio investor and the direct investor. Yet six days later he was again saying how wrong it would be to have in mind an abatement provision for businesses. He said:
I was told—I think by the hon. Member of Weston-super-Mare (Mr. Wiggin) that Lloyd George and Winston Churchill in 1925 were persuaded of the need to have this form of abatement. Both of those gentlemen were very far-seeing, but what they could not foresee was the extent to which that method of relief would engender substantial tax avoidance."—[Official Report, Standing Committee A, 11th February 1975, c. 1169.]
This so-called avoidance is something he said he could not possibly allow; yet here he is now coming forward and proposing to allow it. There really is no apparent explanation; indeed, the only one I have been able to discover in the research I have carried out is that put forward in an article by the late lain Macleod, which appeared in The Times on 18th June 1968. In it he said:
For some curious reason the Treasury seem reluctant to accept even incontestable propositions in the year of their birth. They are noted, filed away and appear years later as Government amendments.
That is precisely what happened with the capital transfer tax—[Laughter.] This is no joke.
We had a very serious thing on that Finance Bill—a guillotine applied on Report stage. The reason that it was guillotined was the Government's refusal to entertain the very proposals that they are now putting forward in this Bill. Had they been debated on Report, as they

should have been, had the debate continued on Report as it did on Committee—we achieved a substantial number of changes in Committee—then those things which the Government now put to this Committee as essential would have been done 18 months earlier and the harm caused in the intervening period would have been avoided. The guillotine on Report was constitutionally irresponsible, fiscally irresponsible and economically irresponsible, and I hope that the Chief Secretary is thoroughly ashamed of himself.

Mr. Graham Page: I join my hon. Friend the Member for Blaby (Mr. Lawson) in reminding the Chief Secretary of the Report stage on the previous Finance Bill. He will recollect how bitter I was because we gained many undertakings in Committee and were then refused them on Report. I do not complain now that we have 41 clauses to correct 31, if they do correct them and if they are not so restrictive that they do not give us the concessions on which we were given undertakings in Committee on that Bill.
I suppose that one should not look a gift horse in the mouth, even if its teeth are not perfect, but this gift horse is so hobbled that, although it is a concession along the lines for which we were pressing, it is not the whole of the concession that the Government should be giving. As my hon. Friend the Member for Guildford (Mr. Howell) said, considering inflation in this period, 30 per cent. is not all that much of a concession. How was 30 per cent. chosen? Why not 50 per cent.? Was the figure just plucked out of the air? The concession should have been much more.
I am a little doubtful about the effect of this 30 per cent. reduction on other relief. Clause 30 of the 1975 Finance Bill gave a concession of several different percentages on the acquisition of a business followed by a transfer in a short time. With the two-year restriction on the ownership for this concession to take effect, there will be a very strange jump in the tax at the end of the two-year period. I do not know why that period has been selected.
But, even worse than that, the two years is cut down if the taxpayer acquired the business through a death. In that case it is no concession at all. The


two years has to be counted from the date of that death. Surely the concession which should have been given here was that given in the case of the transfer of family businesses.
If it is restricted to this extent and if, by some misfortune, the successor dies during the two years after the first owner's death, this concession will be lost altogether. So, although it is a concession, the Treasury has gone out of its way to put these restrictions on it and in certain cases make it worthless.
I hope that all Treasury Ministers have learned a lesson from this. This will take effect only from April 1976. During the previous year, people with businesses will have suffered the full 100 per cent. tax without any concession. Why, why, why did Ministers have to wait that year? It would have been better done on the previous Bill. Even when there was a guillotine on the Report stage, they could at least have given us the clauses and we should have let them through on the nod.
To fail to carry out undertakings given in Committee and then to bring them in a year later in a restricted form is not playing fair with those of us on both sides of the Committee who work very hard on Finance Bills. I hope that the Chief Secretary will take a lesson from these 41 clauses to correct 31 clauses.

11.30 p.m.

Mr. Joel Barnett: We have had an interesting brief debate. The hon. Member for Guildford (Mr. Howell) accused me of not listening. My hon. Friend the former Financial Secretary—the present Minister for Transport—is beside me. He will remember that we sat day after day, night after night, man and boy, until 8 o'clock in the morning constantly listening. I find that accusation a little hard to take. The hon. Member for Guildford has not himself learned very much. He exaggerated the case tonight as he did then.
Once again the hon. Gentleman gave the unfair example of the way in which capital transfer tax affects the man with £100,000 worth of capital in comparison with the way in which estate duty affected him. The fair comparison is not with the man who managed to transfer his assets, meeting the seven-year condition, so that he avoided estate duty. I can see the hon. Gentleman squinting while he is

thinking about it. The fair comparison is with the small business man who, for a variety of reasons, was not able or did not want to pass on his business in his lifetime and who bore estate duty on his £100,000 at higher rates than will a business man under capital transfer tax.
When hon. Gentlemen put forward the case of the small business man it denotes either that they still do not understand the way in which capital transfer tax works to the advantage of the small business man or that they are seeking to make a party political point. I do not wish to accuse them of that.

Mr. David Howell: The right hon. Gentleman seems to be studying my physiognomy with intense care. I was squinting at the memory of the Chief Secretary's and the Chancellor's persistent refusal to realise the basis of the case against capital transfer tax. No one is asserting that the comparison should be between a business man paying tax on a chargeable transfer and a business man who transferred without liability to estate duty and therefore paid no tax. That is not the comparison. Nor is the comparison between the full rate of estate duty and a world in which no one pays any tax.
The comparison should be with reasonable rates of capital taxation of the kind levied, for example, in EEC, OECD and Western countries, which does not result in a small business, a solely-owned business or a business predominantly owned by one person having to be sold and smashed up to pay the tax. That is the comparison we sought to make, and that is the comparison which the right hon. Gentleman should have in mind. He should get out of his mind his comparison between the present position and the position when estate duty was payable. There is no comparison there and we are not making one. He is the one who is making that comparison.

Mr. Barnett: I am sorry that the hon. Gentleman is not making that comparison, because he should. Estate duty was an avoidable tax, and some people managed to avoid it. I will give the Committee some figures. The hon. Member for Guildford once again made accusations about the effects of capital transfer tax on jobs, investments and so on. Those accusations should be


evaluated in the light of the realities under capital transfer tax. There is a significant drop in the yield of capital transfer tax compared with the yield of death duties, even taking into account the drop in the market value of shares.
In 1972–73 the yield from estate duty was £458 million. In 1975–76 the yield from estate duty and capital transfer tax combined was £327 million. The estimate for 1976–77 is £282 million. Even allowing for the drop in stock market values, there is no evidence whatever to support the exaggerated claims made by the hon. Member for Guildford and his hon. Friends. Those figures bear out the truth that the people who are paying and will be paying capital transfer tax would not have paid estate duty, whereas small business men would have paid estate duty will now either pay no capital transfer tax or much less tax than under estate duty. That is the situation. I see that the hon. Member for Blaby (Mr. Lawson) cannot refrain from seeking to intervene every other second.

Mr. Lawson: I am grateful to the right hon. Gentleman for allowing me one intervention, although I would point out that in Committee it is customary to do so.
We have heard this gramophone record played many times. I am a little puzzled. Will the right hon. Gentleman explain what he is trying to justify? Is he trying to justify the 31 original capital transfer tax clauses or the 42 new ones? There is a difference. Which is he trying to justify?

Mr. Barnett: I shall justify both. The hon. Member made no further point than he did in his previous intervention. He said nothing new, which is unusual for him, because he usually does in his interventions. I am sorry that he felt it necessary to intervene at the point he did.
In these debates I said—and my hon. Friend the present Minister for Transport said—that it never was our intention to harm productive assets. It is not our intention now. We said that we would have a general review of capital transfer tax as we saw it settling into our tax structure. When there is a major change in our whole capital taxation

structure by way of the removal of estate duty and the introduction of capital transfer tax, it is not too surprising that there should be a need to review the situation.
I do not apologise because, following that review, we came to the conclusion that it might be right to make certain additional reliefs—although when I heard the hon. Member for Blaby paraphrasing my remarks in Committee I was near to being persuaded that I had got this clause wrong. He was near to persuading me to tell my hon. Friends to vote against the clause. On reflection, I think there is a case for a further concession, but it is a matter of balance.
The hon. Member rightly referred to what I said, and I do not withdraw any words that I used then. It is basically unfair that one man should happen to have £250,000 in one asset—ICI shares, or whatever—and another man £250,000 in a small company and that there should be different levels of taxation for the two. On the other hand, one has to have a balance in not wanting to harm productive assets. I said that at the time. The hon. Member quoted me selectively.

Mr. Cecil Parkinson: rose—

Mr. Barnett: The hon. Member for Hertfordshire, South (Mr. Parkinson) is getting as bad as the hon. Member for Blaby.

Mr. Parkinson: I regard that as a compliment.
Does the right hon. Gentleman now accept that all these exemptions under estate duty, which he persisted in describing as loopholes, were designed for just the same reason—to allow productive assets not to be penalised? Why is it so to be admired that he is introducing loopholes under capital transfer tax whereas under estate duty he was continually talking about closing them? He is making loopholes now.

Mr. Barnett: Because the hon. Member is sitting next to the hon. Member for Blaby he finds it difficult to listen. This is a matter of getting the balance right between equity, on the one hand, and helping small businesses, on the other. I am not pretending that I may not have gone slightly too far; listening to my remarks being referred to by the


hon. Member, I find it possible that I may have gone too far.
When the hon. Member says that we are introducing loopholes he does not take into account the substantial difference between capital transfer tax and estate duty, although he has been constantly telling us the difference between the two. Although in Clause 64 we have made some additional reliefs for small businesses, there still remains a substantial difference between capital transfer tax and estate duty.

Dr. Bray: If my right hon. Friend is nearly persuaded, can he imagine the great effect of the eloquence of the hon. Member for Blaby (Mr. Lawson) on the Back Benches? Can my right hon. Friend explain why, from the example he gave of the man owning £250,000-worth of ICI shares, there should not now be a splendid market for small companies worth about £250,000, with the ICI shareholder selling his shares in ICI, buying such a small company, holding it for two years and then selling it again, thus avoiding paying the full rate of CTT?

Mr. Barnett: That is an interesting point. I shall be happy to consider the situation further, particularly in the light of the comments made by the hon. Member for Blaby, who sought to convince me through my own words that perhaps we have gone too far in the matter. That is possible, and I am happy to reconsider.
In Clause 64 we seek to fix relief at 30 per cent. of the assets value of the business. The effect of the reduction in tax in practice will be such as almost to eliminate in some cases the tax for very small close companies, and in other cases it will broadly correspond to about 45 per cent. reduction in the rate. That is wider than the estate duty, which was confined to specific detail.
The new relief will be extended to all genuine business assets. My view is that the combination of total reliefs for small businesses under CTT is very substantial. The combination between husband and wife being able to transfer the whole of the assets free of the tax, or split the assets and take advantage of the tax and the way it works, the increase in the annual exemption, the exemption out of income, the interest-free

loan, the payments over eight years—all these things will provide substantial relief for small business from the tax. What we are doing in Clause 64 may well be going too far, but it is giving very substantial relief to small businesses.
The right hon. Member for Crosby (Mr. Page) complained—I am not surprised when, having made some relief, there are complaints that one should go further—about the two-year ownership condition. The purpose is to prevent avoidance by deathbed purchases, which were a notorious feature of estate duty, particularly in the case of agricultural land.
The relief will apply to all assets of a farming business, including agricultural land in so far as it does not benefit from relief for agricultural land under Schedule 8 of the Finance Act 1975 as modified by Clause 65 of this Bill. I hope that that will be considered a substantial additional relief.

Mr. Graham Page: The business of providing tenanted property is excluded from this relief. I understand that perhaps if it is tenanted houses, but does it also apply to agricultural land? If one is in the business of providing tenanted agricultural land, does that get relief as a business?

Mr. Barnett: If the right hon. Gentleman is referring to a landlord letting land, the answer is that the relief does not apply, but it does apply to a tenant, who would be entitled to the business relief on tenant's assets.
11.45 p.m.
I was asked a question about forestry on Second Reading. I can tell the Committee that woodlands run as a business equally benefit from the new 30 per cent. reduction, except as regards the timber, to the extent that the deferment of tax is claimed under Schedule 9 of the Finance Act 1975. I hope that those remarks make it clear to the Committee that Clause 64 goes a long way to meet the various commitments and undertakings given in the debate we had during those long days and nights. I hope that the clause will be acceptable to the Committee.

Question put and agreed to.

Clause 64 ordered to stand part of the Bill.

New Clause 1

RELIEF FROM TAX ON CHARGEABLE GAINS IN RESPECT OF BUSINESS PROPERTY

' 1. This section has effect in relation to the disposal of an asset where—

(a) the disposal is one to which section 22(4) of the Finance Act 1965 (gifts etc.) applies or which is deemed to take place by virtue of section 25(3) or (4) of that Act (settled property); and
(b) a reduction in respect of the asset either—

(i) is made under Schedule 10 to this Act (capital transfer tax relief on business property) in relation to a chargeable transfer taking place on the occasion of the disposal; or
(ii) would be so made if there were a chargeable transfer on that occasion and a claim were duly made under that Schedule; and

(c) no reduction in respect of the asset is made under Schedule 8 to the Finance Act 1975 (capital transfer tax relief for agricultural property and shares and debentures of companies owning agricultural property); and
(d) a claim for relief under this section is made within two years of the end of the year of assessment in which the disposal is made or such longer time as the Board may allow.

2. Where subsection I above applies the consideration on the disposal of the asset for the purposes of the said sections 22(4) and 25(3) or (4) shall be treated as reduced by 30 per cent.

3. For the purposes of Part HI of the said Act of 1965 (capital gains)—

(a) the consideration for the disposal of the asset shall, if apart from this section a gain would accrue on the disposal, be determined as if the market value of the asset were reduced by the amount mentioned in subsection (6)(a) or (b) below whichever is the smaller; and
(b) the consideration for the acquisition of the asset on the disposal shall be determined as if its market value were reduced by the amount mentioned in subsection (7) below.

4. Subsection (3) above does not affect the computation of development gains: and any gain computed in accordance with that subsection shall be a chargeable gain only to the extent, if any, to which it exceeds any development gain accruing on the disposal in question.

5. Subsection (3) above does not affect the computation of development losses except that, where paragraph (b) of that subsection applies to the computation of the chargeable gain or allowable loss accruing on a disposal, no development loss shall accrue on the disposal unless there is an allowable loss as so computed and, if there is such an allowable loss,

the amount of the development loss shall not exceed the amount of that allowable loss.

6. The amounts referred to in subsection (3) (a) above are—

(a) an amount equal to the fraction of the market value of the asset of which—

(i) the numerator is the amount of the reduction in respect of the asset that is made under this section; and
(ii) the denominator is the value of the asset as it is or would be taken into account in relation to the disposal in question before any reduction under this section;

(b) the amount by which the market value of the asset exceeds the aggregate of—

(i) the sums allowable in relation to the disposal under paragraph 4 of Schedule 6 to the said Act of 1965 (acquisition cost etc.); and
(ii) the amount of any development gain accruing on the disposal;

and the sums mentioned in paragraph (b)(i) above shall be determined without any reduction under section 33(1)(b) or (2)(b) of the said Act of 1965 or paragraph 18(4) of Schedule 3 to the Finance Act 1974 (replacement of business assets).

7. The amount referred to in subsection (3)(b) above is the difference between—

(a) the gains chargeable on the disposal (whether as chargeable gains, development gains or partly one and partly the other); and
(b) the gains that would have been so chargeable if this section had not been enacted.

8. Any claim under this section shall be made—

(a) in the case of a disposal to which the said section 22(4) applies, by the person making the disposal and the person to whom it is made; and
(b) in any other case, by the person making the disposal.

9. This section applies to disposals made after 6th April 1976.'—[Mr. Cope.]

Brought up, and read the First time.

The Deputy Chairman (Sir Myer Galpern): With this we may discuss new Clause 2—[Elimination of double taxation]:
'Where on a capital transfer a liability to capital gains tax arises in respect of the same assets the tax shall not exceed the liability for charge to capital transfer tax or to capital gains tax whichever is the greater.'

Mr. Cope: I beg to move, That the clause be read a Second time.
We have here a gift tax horse which I am proposing to look in the mouth. Under the Bill's provisions there will be an anomalous position. The Chief Secretary has explained that under Clause


65 the agricultural property relief provides a 50 per cent. reduction for the property to which it applies. This relief applies both to capital gains tax and capital transfer tax. I hope that the Chief Secretary will confirm this.

Mr. Joel Barnett: Will the hon. Gentleman repeat the point?

Mr. Cope: As I understand it, relief under Clause 65, the agricultural property relief, will apply both to capital transfer tax and capital gains tax. This arises because the relief under Clause 65 is done by reference to Section 55 of the Finance (No. 2) Act 1975, which in itself modifies Schedule 8 of the Finance Act 1975. It seems that the capital gains relief provided by the No. 2 Act must also apply to the principal Act of 1975 and hence to the relief in Clause 65. I think that the Chief Secretary is confirming that I am correct in this surmise.

Mr. Joel Barnett: If it helps the hon. Gentleman's speech the answer is "Yes".

Mr. Cope: It does help my speech, because the relief I am seeking to insert with this clause is exactly the same relief for business assets, in relation to capital gains tax, as is conferred in respect of agricultural property relief under Clause 65. Agricultural property relief was introduced in the first place at the start of the capital transfer tax but did not immediately apply to capital gains tax. It was extended to that later in the year.
It seems that this relief on business assets should not apply only to capital transfer tax, but, like the agricultural property relief, should also be extended to capital gains tax. There is a strong case, but no doubt it will be made in discussion on new Clause 2, for capital transfer tax to apply to gifts and at death and for capital gains tax to apply only to sales. As long as the Government fail to recognise this, if they do not have the wisdom to look kindly on new Clause 2, they should at least see the reasonableness, as they have done in the case of agricultural property relief, of dealing with both the taxes on the same sort of basis.
The anomaly arises in a slightly complicated way because of the history and the fact that the relief for agricultural property was not in the first place applied to the capital gains tax as well as to the

capital transfer tax. Nevertheless, the small business relief is applied by a new schedule in the Bill; therefore the new clause is required if the CGT is to be similarly affected.
Although the drafting looks rather complicated, I am sure the Chief Secretary will have recognised that it is modelled basically on Section 55 of the Finance (No. 2) Act 1975 and is not really as novel as it looks at first sight.
Last year, as hon. Gentlemen have already mentioned in the last debate, both upstairs and downstairs Ministers lectured us about how the CTT, CGT and the combination thereof would not damage small businesses and agriculture. It was obviously realised, as we discovered in the last debate and in the Budget speech, that they would be damaged to a certain extent. The Chancellor of the Exchequer gave two basic reasons—which were more or less repeated by the Chief Secretary tonight, surprisingly enough—for the clauses put forward, to meet legitimate grievances and to remedy technical defects.
New Clause 1 is in the class of technical defects rather than legitimate grievances, and I hope that the Chief Secretary sees it in those terms. In case he should see it as a legitimate grievance, or a possible legitimate grievance, it is necessary for me to follow up for a moment what he was saying about balance, because that would apply if it were in the prospective legitimate grievance category. What he meant by balance, it seemed to me, was a balance between principles, which he reckons he stated in the earlier debates, and loopholes, which he reckons he is dealing with now.
The real principle involved is whether or not these businesses should be broken up at the time when the proprietor dies or passes on the business to the people, whoever they are, who take it over, because that, quite simply, is the effect of the combination of CTT and CGT.
The Government have recognised this to a certain extent but not to the degree that I should like to see. The Chancellor of the Exchequer, in his Budget speech—and the Chief Secretary repeated it in very similar words—was concerned to ensure that the tax does not damage productive activities which are of value to the national economy. It is bund to damage them, even if new Clause 1 were


carried, and even if new Clause 2 were carried as well. It is a typical exaggeration of the Chancellor of the Exchequer, and the question is how much the damage will be. In my opinion, the damage is still too great.
It seems to me extraordinary that in this choice between CTT and CGT the Government have chosen to help the stagnant business rather than the growing one. Capital transfer tax, on a business of a given size, applies the same whether the business has grown in the last few years or is stagnant. Capital gains tax applies more to the business which has grown steadily than to the one which is stagnant. To relieve the capital transfer tax liability and not the capital gains tax liability is to help stagnant companies at the expense of the growing companies.
I see my hon. Friend the Member for Oswestry (Mr. Biffen) on the Front Bench. Therefore, I should add at once that by "stagnant" I mean "stagnant" in money terms. In real terms a business, even if it stands still, can seem a growing business, and capital gains tax is charged on the inflation that affects the business as well as its actual growth. For all these reasons, new Clause 1 ought, I think, to commend itself to the Committee.

Mr. David Mitchell: I wish to say a few words on the subject of new Clause 1 and to link with them some comments on new Clause 2.
We should welcome the Government's belated conversion to at least some of the cases that we were putting to them last year to illustrate that they had to do something for the smaller business sector and that what they were proposing then was inadequate. What they are proposing this year is still inadequate, because their concession applies to majority holdings, and even a holding of 20 per cent can be of significant importance in terms of the retention of a small business as an ongoing unit if it has to be sold outside the family.
Secondly, the Government's concession today does no more than offset inflation, which has itself pushed businesses into a higher rate of capital transfer tax. We have to remember that since this proposal was first introduced, inflation has gone

up some 46·8 per cent. Inevitably, the tax liability is enormously greater on the same assets.
Thirdly, the Government's concession does not remove the double taxation of capital transfer tax and capital gains tax. Earlier, the Chief Secretary said that the Government did not want to kill productive assets. Those words cheered me, because I felt that they might be the forerunner to his accepting new Clause 1, new Clause 2, or both, since they would do a great deal to take the Government along the road indicated by the right hon. Gentleman of not wanting to kill productive assets.
If we are to have a healthy private sector, we have to have substantial capital investment in it. Taxation, which is designed to take large chunks of capital away from smaller businesses inevitably will strip business of the capital that they need to keep themselves modern and competitive. The worst aspect of it is that, the more vigorous the business, the greater the liability to capital gains tax will be.
I take just one example. Let us suppose that a business has been started from nothing and that, during a man's life, it has been built up to £300,000. Roughly one-third of that will go in capital gains tax, so there is £100,000 gone, leaving £200,000. If that is to be preserved intact and passed to the next generation in the business, before the concession was announced there would have had to be £211,870 of other assets brought in and paid over in tax to leave this asset intact. With the 30 per cent reduction that we get now, the bill will be £140,000.
Would it be possible for a business of £300,000, with £100,000 going out for capital gains tax, then to find about £140,000 over an eight-year period? To do that, the proprietors would have to draw out £17,000 a year, post tax, before they started to pay anything to keep themselves. I reckon that they would therefore require to have a gross income in excess of £60,000 a year for eight years before they would be able to pay the tax liability. What business of £200,000 or £300,000 of assets could pay to the proprietors that sort of income to enable them to find the money to pay the capital gains tax liability?
With the concession that we have today, unless the Government give the further concession asked for in new Clause 2, it is certain that the growing business which is making a vigorous contribution to Britain's economy will be savagely hit by the combination of capital gains tax and capital transfer tax. These businesses which should be providing the future growth of our economy will be savagely hit. I urge the Chief Secretary to accept new Clause 2.
12 midnight.

Mr. Lawson: I am grateful for the privilege of catching your eye, Sir Myer.
The remarks of my hon. Friend the Member for Basingstoke (Mr. Mitchell) were precisely to the point and I support them unreservedly. They make a nonsense of the Chief Secretary's claim, which he has repeated tonight, that capital transfer tax is no worse—indeed that its rates are less onerous—than the estate duty which preceded it. For the right hon. Gentleman failed to mention that with estate duty there was no cumulation with capital gains tax. Capital gains tax was paid when there was a disposal during lifetime and estate duty on death—but never the two together. With capital transfer tax the combined effect of the two taxes produces really vicious and penal rates.

Mr. David Mitchell: My hon. Friend gives me the opportunity of drawing attention to a total fallacy in the comments made earlier by the Chief Secretary when he said the tax take from capital transfer tax was less than the take from estate duty. The right hon. Gentleman's figures failed to take into account that, as capital transfer tax is payable on a husband or wife survivor, there is a time lag of some years until the surviving spouse dies. Projections for tax takes for this year, next year and the year after are nothing compared with the actual take which will occur shortly after that.

Mr. Lawson: My hon. Friend has made a most pertinent observation. I am not sure whether he was intervening in my speech or in the contribution which the Chief Secretary is about to make, but the point was so pertinent that it was well worth making.
The Chief Secretary is a funny fellow. In our last debate, we had an example of

how he had given a sensible concession which he had previously refused, time and again, to yield to us, despite the cogency of our arguments. But the one thing which he had agreed last year needed to be done is the one thing he has not done.
The right hon. Gentleman said in our debates last year that the cumulation of capital transfer tax and capital gains tax was wholly wrong. He so likes to hear me quoting his own words to him that I shall quote what he said last year:
Let me turn now to capital gains tax. The arguments about capital gains tax indicate a need for an examination of that tax. That I do not dispute.
He went on about the cumulative effect and said:
I hasten to add that I accept that in certain instances it can be unfair. Where a man has been running his company from 1965 for 10 years a substantial liability to capital gains tax would accrue. The answer there lies more with a reform of the capital gains tax, whether it be by way of indexation which the hon. Gentleman is so fond of, or another way which others may prefer, a more progressive or different way of dealing with capital gains tax.
I was the hon. Gentleman to whom the Chief Secretary referred. But he excused himself for doing nothing about it then by his final words—namely:
What is at issue here is the capital gains tax system and not the capital transfer tax system."—[Official Report, Standing Committee A; 11th February, 1975, c. 1175–6.]
However, we are now talking about the capital gains tax system. The right hon. Gentleman, having conceded that something needs to be done, that it is unfair, grotesque and penal when the two taxes are put together, does not come forward with anything to deal with the situation. That is astonishing when there are 41 new clauses on capital transfer tax, all of which he resisted 18 months ago. He has done nothing about the one thing on which he accepted that action was needed.
I hope that the right hon. Gentleman will accept new Clause 2. That is probably the simplest course for him to take. If, however, he feels that he would rather create something that bears his own inimitable signature, then I trust he will bring something forward on Report in the spirit of the other clauses in the capital transfer tax part of this Bill, and in the spirit of what were tantamount to the


undertakings that he gave in Standing Committee in the early months of last year.

Mr. Joel Barnett: I deal first with new Clause 1, which was introduced by the hon. Member for Gloucestershire, South (Mr. Cope). As he rightly said, it is intended to have the effect of reducing the market value of the asset transferred, subject to certain conditions, by 30 per cent.
Although I do not go back on any of the words that I used that have been quoted by the hon. Member for Blaby (Mr. Lawson), the situation is not anything like as bad as Opposition hon. Members have suggested as regards capital gains tax as it affects the sale of businesses or the transfer of businesses in a lifetime. Of course, there is no question of capital gains tax on death. If we are talking about capital gains tax in a lifetime—

Mr. Lawson: rose—

Mr. Barnett: This is unbelievable. I have only just started.

Mr. Lawson: Is the right hon. Gentleman assuring the Committee that it is not the intention of the Government to restore capital gains tax on disposal on death?

Mr. Barnett: I have no intention of making any such commitment tonight. I had only just started my remarks. I want to be brief as I know that Opposition Members want to come to a vote as soon as possible. [Interruption.] Maybe the right hon. Member for Yeovil (Mr. Peyton) wishes to stay for a long time. I have no objection to that as long as I am not here.
We are talking about the way that capital gains tax affects transfer in life. As I have said, it does not apply on death. On the lifetime transfer, there are already substantial reliefs. I am not saying that they are sufficient, but they are reliefs. For example, there is relief in respect of retirement, which exempts the first £20,000 worth of gains on disposal by an individual over 65 of a business he has had for 10 years or more. There are a number of other concessions available for capital gains tax, but I accept that there

is a serious problem as regards the combined burden in some instances when capital gains tax and capital transfer tax operate together. I shall return to that when I have referred to new Clause 2 and some of the matters raised by the hon. Member for Basingstoke (Mr. Mitchell).
First, I deal with the point that the hon. Gentleman raised in his second speech, if I may put it in that way, before turning to his first speech. The hon. Gentleman sought to turn the substantial advantage under capital transfer tax, whereby spouses can transfer businesses, or any other assets, without payment of capital transfer tax—that is total, exemption, unlike estate duty—into a disadvantage. The hon. Gentleman is right to suggest that the yield from capital transfer tax in the early stages is lower than it would be at a later stage. The reason for that is the substantial advantage that we have introduced into capital transfer tax by the relief which will accrue largely to widows. We know that wives tend to live rather longer than husbands.
It is true that at the end of the day there will be a higher yield from capital transfer tax when the second spouse dies. That applies because of the substantial advantage that we have already given under capital transfer tax. We have no intention of giving the further relief which the hon. Gentleman seeks under consanguinity as the asset is passed on to heirs and so on. This is not our intention, and I do not apologise for that.
The next point the hon. Gentleman made his example of a company where the combined capital gains tax and capital transfer tax would be £140,000. I say again to the hon. Gentleman that, although I do not necessarily complain about it, when examples are given in this sphere they tend to be exaggerated examples. If one was talking of a company which was faced with a combination of capital gains tax and capital transfer tax of £140,000, having taken no measures prior to that, it is at least a strong possibility that under estate duty there would have been not just that liability but considerably more.
However, as I say, I accept that there is a problem of the combined effect of the two taxes. I think that there may well be a case to look at, as I said last year, on the other hand, I am bound


to say also that there are two different taxes. Capital transfer tax is a replacement of estate duty. It is a tax on the passing of assets from one person to another, other than a spouse. Capital gains tax is a tax on an accumulation, a tax on a gain on a particular asset. The two things are separate. However, I recognise that because of the combined effect, in certain circumstances there can be a harsh effect.

Mr. Loveridge: Is not the essence of the case that my hon. Friends have been putting not so much the question of harshness as the question of the break-up of productive assets? My hon. Friend the Member for Basingstoke (Mr. Mitchell) referred to a lifetime gift of £300,000 costing £140,000. If a lifetime gift in that figure can be made only by placing such a burden of debt on the firm that it must close down, in practice the gift cannot be made. That is the essence of the case. Many of these firms are larger than that. They are the most productive of our firms. They have the very assets that the Chief Secretary asserts that he does not wish to break up. Will he consider that aspect?

Mr. Barnett: Clause 64 gives very considerable relief in order precisely to avoid a break-up of assets of the kind the hon. Gentleman describes. As I have already indicated, the hon. Member for Basingstoke exaggerates the effect on small businesses. I do not accept that there will be many examples of the kind that he gave to the Committee where there would be a tax liability of f140,000.
I come to the question of the combined effect. It is a question of striking the balance between equity and not wishing to have a break-up of productive assets. I am glad that the hon. Gentleman referred to this as the break-up of productive assets rather than allowing assets to be transferred from a family to the children, because it does not follow that the children will continue to manage the assets as well as the entrepreneur father did.
I accept that there is a danger of a break-up of assets occurring. That is to be avoided, if at all possible. On the other hand, one must be careful to ensure that there is a reasonable balance and that too much relief is not given in this

direction although there is an inability to give capital gains tax relief in other areas.
I am prepared to consider what is said in Standing Committee and also to look again, without commitment, at the way capital gains tax comes into the balance of the total charge on lifetime gifts and on death.
12.15 a.m.
There are considerable anomalies here. The hon. Member for Blaby fairly made the point of the difference between estate duty and the way that capital transfer tax and capital gains tax work. Under estate duty, capital gains tax never worked in conjunction with estate duty, whereas in the case of a lifetime transfer capital gains tax and capital transfer tax work together. I want to consider the whole of that, without commitment, but I promise that I shall do that. I shall consider also the further views of the Committee when we go upstairs. With that explanation, I hope that the hon. Member for Gloucestershire, South will not feel it necessary to press the new clause.

Mr. David Howell: This little debate is one more mournful reminder of the many inadequacies of the capital transfer tax, and the Chief Secretary realises them, and the interaction of capital gains tax with capital transfer tax that we have just been discussing is one example of the inadequacies. It is interesting to see how the Chief Secretary, who has given a lot of time and thought to this, as we move away from the era in which CTT had to be introduced in a hurry 18 months ago begins to apply his mind and see some of the absurdities in the tax that he was forced, for other reasons and under other pressures, to introduce in the first place.
We shall come back to this. CTT is already a bit of the past. It was part of the price paid for the last but one social contract—the one that gave us 25 per cent. inflation. Already it has become a monument to past adventures and past disasters. It is riddled with holes and with woodworm, and more cracks are appearing in the edifice every day. The CTT problem is a difficult one, and it is understandable and right that the Chief Secretary should be ready to look at it again.
However, when we listened to what the "look" would amount to, we found it was a little fuzzy at the edges. It is not quite cooked. This takes us back to the familiar world of past CTT debates when Ministers suddenly realised that they were in a hopeless position and offered what was in their minds as a possible remedy. They are doing it again, but it is only a vague thought, induced by vague words such as "without commitment" and "taking into account the balance of the total charge of transfer both in life and on death" and other words which it was difficult to get down at this late hour. One of my hon. Friends says "And in relation to what is laid down on the instructions of the TUC."
It is difficult to reach my judgment on this matter. I must suggest to my hon. Friend that he should press the new clause. We are left with a situation in which CGT remains interacting and accumulating with CTT. The Chief Secretary and the Financial Secretary said last year, or at any rate hinted, that CGT would be reformed. The former Financial Secretary said that he did not like CGT. We waited for this year's Budget to see what the reform was, but we found it was nothing except minor concessions, so the heavy burden remains.
The right hon. Gentleman may say it is an exaggeration and dispute the figures quoted by my hon. Friend the Member for Basingstoke (Mr. Mitchell), but the

fact is that when one does the sum these are the figures that come out. These are the realities that face business people. When they transfer a business during their life time, these are the figures with which they have to deal on retirement. These are the facts which threaten the break-up of productive assets in the way that the old estate duty never did and the way that a sensible organised system of capital taxation should not do. As long as the Chief Secretary adheres to that position, so long are we right to press the new clauses and insist that we get some sense into our capital taxation again.

Mr. Cope: I think my hon. Friend the Member for Guildford (Mr. Howell) is right to say we should press this matter. But, in view of the undertakings given by the Chief Secretary, I beg to ask leave to withdraw the motion.

Motion and clause, by leave, withdrawn.

New Clause 2

ELIMINATION OF DOUBLE TAXATION

'Where on a capital transfer a liability to capital gains tax arises in respect of the same assets the tax shall not exceed the liability for charge to capital transfer tax or to capital gains tax whichever is the greater.'—[Mr. David Mitchell.]

Brought up, and read the First time.

Question put, That the clause be read a Second time:—

The Committee divided: Ayes 162, Noes 169.

McCusker, H.
Penhaligon, David
Speed, Keith


Macfarlane, Nell
Percival, Ian
Spicer, Michael (S Worcester)


Marten, Neil
Peyton, Rt Hon John
Stanbrook, Ivor


Maude, Angus
Powell, Rt Hon J. Enoch
Steel, David (Roxburgh)


Maxwell-Hyslop, Robin
Price, David (Eastleigh)
Steen, Anthony (Wavertree)


Mayhew, Patrick
Prior, Rt Hon James
Stradling Thomas, J.


Meyer, Sir Anthony
Pym, Rt Hon Francis
Tapsell, Peter


Miller, Hal (Bromsgrove)
Ralhbone, Tim
Taylor, Teddy (Cathcart)


Mills, Peter
Rees, Peter (Dover amp; Deal)
Temple-Morris, Peter


Mitchell, David (Basingstoke)
Rees-Davies, W. R.
Thomas, Rt Hon P. (Hendon S)


Moate, Roger
Renton, Rt Hon Sir D. (Hunts)
Thompson, George


Molyneaux, James
Renton, Tim (Mid-Sussex)
Tugendhat, Christopher


Monro, Hector
Rhys Williams, Sir Brandon
Wakeham, John


Moore, John (Croydon C)
Rippon, Rt Hon Geoffrey
Walder, David (Clitheroe)


More, Jasper (Ludlow)
Roberts, Michael (Cardiff, NW)
Walters, Dennis


Morrison, Charles (Devizes)
Roberts, Wyn (Conway)
Weatherill, Bernard


Morrison, Hon Peter (Chester)
Ross, William (Londonderry)
Whitelaw, Rt Hon William


Mudd, David
Rossi, Hugh (Hornsey)
Wiggin, Jerry


Nelson, Anthony
Sainsbury, Tim
Wigley, Dafydd


Newton, Tony
Shelton, William (Streatham)
Winterton, Nicholas


Normanton, Tom
Shepherd, Colin
Wood, Rt Hon Richard


Nott, John
Shersby, Michael
Young, Sir G. (Ealing, Acton)


Oppenhelm, Mrs Sally
Silvester, Fred
Younger, Hon George


Osborn, John
Sims, Roger



Page, John (Harrow West)
Sinclair, Sir George
TELLERS FOR THE AYES:


Page, Rt Hon R. Graham (Crosby)
Skeet, T. H. H.
Mr. John Corrie and


Pardoe, John
Smith, Dudley (Warwick)
Mr Carol Mather.


Parkinson, Cecil

NOES


Anderson, Donald
Fletcher, Raymond (Ilkeston)
Molloy, William


Archer, Peter
Fletcher, Ted (Darlington)
Morris, Charles R. (Openshaw)


Armstrong, Ernest
Foot, Rt Hon Michael
Moyle, Roland


Atkins, Ronald (Preston N)
Ford, Ben
Noble, Mike


Barnett, Rt Hon Joel (Heywood)
Forrester, John
Ogden, Eric


Bates, Alf
George, Bruce
O'Halloran, Michael


Bean, R. E.
Gilbert, Dr John
Ovenden, John


Bennett, Andrew (Stockport N)
Ginsburg, David
Palmer, Arthur


Bidwell, Sydney
Golding, John
Park, George


Bishop, E. S.
Gould, Bryan
Parry, Robert


Blenkinsop, Arthur
Graham, Ted
Pavitt, Laurie


Boardman, H.
Grocott, Bruce
Pendry, Tom


Bottomley, Rt Hon Arthur
Hamilton, James (Bothwell)
Phipps, Dr Colin


Boyden, James (Bish Auck)
Harper, Joseph
Prescott, John


Bray, Dr Jeremy
Harrison, Walter (Wakefield)
Price, William (Rugby)


Brown, Hugh D (Provan)
Hart, Rt Hon Judith
Radice, Giles


Brown, Robert C. (Newcastle W)
Horam, John
Richardson, Miss Jo


Brown, Ronald (Hackney S)
Howell, Rt Hon Denis
Roberts, Albert (Normanton)


Buchan, Norman
Huckfield, Les
Robinson, Geoffrey


Buchanan, Richard
Hughes, Robert (Aberdeen N)
Roderick, Caerwyn


Campbell, Ian
Irvine, Rt Hon Sir A. (Edge Hill)
Rooker, J. W.


Canavan, Dennis
Irving, Rt Hon S. (Dartford)
Roper, John


Carmichael, Neil
Jackson, Colin (Brighouse)
Ross, Rt Hon W. (Kilmarnock)


Clemitson, Ivor
Jackson, Miss Margaret (Lincoln)
Rowlands, Ted


Cocks, Michael (Bristol S)
Jay, Rt Hon Douglas
Sandelson, Neville


Cohen, Stanley
Johnson, James (Hull West)
Sedgemore, Brian


Coleman, Donald
Johnson, Walter (Derby S)
Shaw, Arnold (Ilford South)


Colquhoun, Ms Maureen
Jones, Barry (East Flint)
Sheldon, Robert (Ashton-u-Lyne)


Concannon, J. D.
Judd, Frank
Short, Rt Hon E. (Newcastle C)


Conlan, Bernard
Kilroy-Silk, Robert
Sillars, James


Craigen, J. M. (Maryhill)
Lamond, James
Silverman, Julius


Crawshaw, Richard
Latham, Arthur (Paddington)
Skinner, Dennis


Cronin, John
Lewis, Arthur (Newham N)
Small, William


Crosland, Rt Hon Anthony
Loyden, Eddie
Smith, John (N Lanarkshire)


Cunningham, G. (Islington S)
Luard, Evan
Snape, Peter


Cunningham, Dr J (Whiteh)
McCartney, Hugh
Spearing, Nigel


Davidson, Arthur
McElhone, Frank
Spriggs, Leslie


Davies, Bryan (Enfield N)
MacFarquhar, Roderick
Stallard, A. W.


Davis, Clinton (Hackney C)
McGuire, Michael (Ince)
Stoddart, David


Deakins, Eric
Mackenzie, Gregor
Stott, Roger


Dean, Joseph (Leeds West)
Mackintosh, John P.
Strang, Gavin


Dempsey, James
McMillan, Tom (Glasgow C)
Taylor, Mrs. Ann (Bolton W)


Doig, Peter
McNamara, Kevin
Thomas, Ron (Bristol NW)


Dormand, J. D.
Madden, Max
Thorne, Stan (Preston South)


Duffy, A. E. P.
Magee, Bryan
Tierney, Sydney


Eadie, Alex
Marquand, David
Tinn, James


Ellis, John (Bragg amp; Scun)
Marshall, Dr Edmund (Goole)
Torney, Tom


Ellis, Tom (Wrexham)
Maynard, Miss Joan
Wainwright, Edwin (Dearne V)


Ennals, David
Mendelson, John
Walden, Brian (B'ham, L'dyw'd)


Evans, loan (Aberdare)
Miller, Dr M. S. (E Kilbride)
Walker, Harold (Doncaster)


Ewing, Harry (Stirling)
Miller, Mrs Millie (IIford N)
Walker, Terry (Kingswood)


Faulds, Andrew
Mitchell, R. C. (Soton, Itchen)
Ward, Michael


Fernyhough, Rt Hon E.

Watkins, David
Wilson, Alexander (Hamilton)
Woof, Robert


White, James (Pollok)
Wilson, Rt Hon H. (Huyton)
Young, David (Bolton E)


Whitlock, William
Wilson, William (Coventry SE)



Williams, Alan (Swansea W)
Wise, Mrs Audrey
TELLERS FOR THE NOES.


Williams, Sir Thomas
Woodall, Alec
Mr. Frank R. White and 




Mr. Thomas Cox.

Question accordingly negatived.

Bill (Clauses 14, 21, 24, 26, 27, 48, 52 and 64) reported, without amendment; to lie upon the Table.

NEW ZEALAND BUTTER

[Commission Documents Nos. R/2099/75 and R/1025/76]

Motion made, and Question proposed, That this House do now adjourn.—[Mr. Stoddart.]

12.32 a.m.

The Minister of State, Agriculture, Fisheries and Food (Mr. Edward Bishop): rose—

Mr. Nigel Spearing: On a point of order, Mr. Deputy Speaker. It is a tradition of this House, whenever we debate any matter—it is New Zealand butter tonight—that we have the proper documents before us. We have a memorandum from the Minister of State in which he says that the official text of the proposal is not available. Moreover, it says that the quantities are left blank in the proposal, the intention being that they should be decided by the Council of Ministers. I understand that some hon. Members on the Scrutiny Committee have the working document but I have inquired at the Vote Office and have found that this working document is not available to hon. Members. I therefore ask, the facts being as they are, whether this debate is in order because we do not have the document in front of us.

Mr. Clement Freud: Further to that point of order, Mr. Deputy Speaker. We are about to embark on a debate on New Zealand butter of which no notice was given and for which no adequate explanation has been offered. We are told that the debate follows the recommendation of the Select Committee, whose report is yet to be printed; the Committee itself was asked to report on the EEC working document which is non-specific in its recommendations and is yet to be printed and is not available at the Vote Office. Further, we are told

that this document is being discussed in Brussels at a meeting of EEC Ministers today.
Not content with this retrospective debate, the Government have circulated a business statement containing a sentence which was not read out in the statement made by the Leader of the House. This business statement circulated to the Whips Office says:
However, in all the circumstances, the House might prefer not to proceed with the debate today but to await the report from the Minister on the outcome of the Council meeting.
For this reason I would ask that this Question be not put.

Mr. Neil Marten: Further to that point of order, Mr. Deputy Speaker. I confirm what the hon. Member for Newham, South (Mr. Spearing) says. I have a copy of the draft regulations, which is in blank, because I was on the Scrutiny Committee. I asked at the Vote Office a short while ago whether they were available, and they were not. If they are not available, hon. Members cannot see what we are debating and we should therefore not proceed. It is as simple as that.

The Deputy Speaker (Sir Myer Galpern): Order. The points of order which have been raised are not matters for the Chair. What is a matter for the Chair is that if they are prolonged and the debate is not proceeded with, the time taken up by points of order will be deducted from the one and a half hours set aside for the debate.

Mr. John Davies: Further to the point of order, Mr. Deputy Speaker. The paper which members of the Scrutiny Committee may have is a working paper, whereas the Scrutiny Committee, normally speaking, is required to give its opinion on Commission documents, supplemented by explanatory memoranda. In this case there is no Commission document, but there is an explanatory memorandum, upon which the Scrutiny Committee has dwelt and made a report. The report has been made available through the Vote Office in cyclostyled form. I submit that the


debate can proceed, and would usefully proceed, since there is great urgency that this matter be dealt with in the Council of Ministers.

The Lord President of the Council and Leader of the House of Commons (Mr. Michael Foot): The point that the right hon. Member has just made is of great assistance to the House and I hope that the debate can proceed on that basis on the Adjournment motion. I fully understand that hon. Members find the procedure unsatisfactory. As I said earlier today, it is extremely inconvenient for the House and unsatisfactory that we should have to deal with these matters in this way, but the Scrutiny Committee has had only a very short time to look at them. We thought that it was better that there should be a debate before the decision was taken rather than that we should have no debate at all. It is on that basis that we suggested that it should take place on the Adjournment.
I hope that the House, when it hears what the Minister and others have to say, will be better able to see how we should proceed. Certainly, having the debate on the Adjournment does no injury to the House. In future we shall have to find a better way of dealing with all these matters—I am fully in accord with that proposition—but that does not mean that it would be a disadvantage for the House to discuss the matter at this moment before a decision is taken in Brussels. The views expressed will be conveyed to my right hon. Friend there. I should have thought that that was the best thing for the House to do.

Mr. Geoffrey Rippon: Further to the point of order, Mr. Deputy Speaker. I do not understand why the Leader of the House says that the matter can only be proceeded with in this way. As I understand it, this matter arises under Protocol 18 of the Treaty of Accession, Article 5(2) of which provides:
Appropriate measures to ensure the maintenance after 31 December 1977 of exceptional arrangements in respect of imports of butter from New Zealand, including the details of such arrangements, shall be determined by that Council, acting unanimously on a proposal from the Commission, in the light of that review.
It was clearly intended that there should be a proposal of the Commission, which would be available and in the light of

which the Council of Ministers would take a decision.
Of course I accept that it is part of the prerogative power of the Crown that Her Majesty's Government can enter into agreements without notifying the House in advance of the nature of those agreements. But the Leader of the House, who took part in debates on the European Communities Bill, will remember that when, on 8th March 1972, when we debated this matter, the present Secretary of State for the Environment said of any agreement that the Government might make:
… we could not interfere with it, amend it, or reject it".
I replied:
One thing should be made clear. Of course, the House of Commons could debate it. There is no doubt about that. As we have made clear all along, any Government are responsible to the House of Commons. Therefore, if they entered, or allowed the Community to enter, agreements which could not be carried through this House or which were subject to a vote of censure, they would be open to great difficulty."—[Official Report, 8th March 1972; Vol. 832, c. 1580–1.]
So of course he can say that the Government have a prerogative power to enter into this agreement, but it was clearly the intention all along that this should be debated in good time and that we should have regard to the special arrangements made.

Mr. Douglas Jay: What no one wants is that we should have no debate and that then the Minister in Brussels should reach an agreement and come back and present us with a fait accompli. Therefore, if we are not to have a debate tonight, I hope that we can first have an assurance from the Government that the Minister will not finally and irrevocably commit himself in the Council of Ministers on this issue.

Mr. Foot: I regard the procedure as highly unsatisfactory, and we shall have to devise a way of dealing with these matters in the future. Many of the difficulties in which the House is now encoiled were prophesied, and we shall have to find a solution.
When I was confronted on Thursday afternoon, Friday morning and again this morning with the certainty that negotiations would be taking place in Brussels tonight and tomorrow morning, I had to


decide whether to make facilities available for discussion in the House. I took into account the representations made by the Chairman of the Scrutiny Committee, who asked for a debate, although admittedly he said that there was a possibility that we could have a debate later. I also took into account what I thought would be the strong feeling on both sides of the House that it would be reprehensible to deny the possibility of a debate.
However, if the House does not want the debate tonight we could abandon it. I do not think that that is the best way to proceed. It would be better to hear what is the position. Hon. Members may give their views, some of which can be conveyed to my right hon. Friend who will be concluding the negotiations tomorrow. No doubt the House will want to know the decision that is made in Brussels, and when that is reported to the House perhaps we could—

Mr. John Mendelson: That is too late.

Mr. Foot: It is no good my hon. Friends saying it is too late. That is the procedure to which the House agreed when the European Communities Bill was before it. On this occasion we are trying to carry out as faithfully and responsibly as we can the Scrutiny Committee's recommendations. I think the right hon. Member for Knutsford (Mr. Davies) will agree that that is what we have sought to do on every occasion. We are seeking to do it on this occasion, to give the House a chance to discuss the matter before it is decided in Brussels tomorrow. What the House may wish to do after tomorrow is another matter.
I suggest that it is better to have the debate now, but if the House does not want it I shall not force the debate on the House. I am offering the time to the House because I think it better to have the debate before the decision is taken.

Several hon. Members rose—

Mr. Deputy Speaker: Order. I have already proposed the Question, That this House do now adjourn. If there should be a debate, all the time taken on points of order will come out of the one-and-a-half hours allocated to the debate. I appeal to hon. Members to allow me to

call the Minister of State. The original point of order was concerned with the absence of papers, but since then there has been a shift in the contents of the points of order.

Mr. John Mendelson: Further to that point of order, Mr. Deputy Speaker. Because of the importance of the principle, may I put this point to the Leader of the House? Neither this afternoon when he was first questioned on this matter, nor tonight has he explained why a debate is essential after such short notice—he says from last Thursday. The decision must be reached tomorrow, according to the right hon. and learned Member for Hexham (Mr. Rippon), who was the responsible Minister at the time of the negotiations. If there is to be a unanimous decision by the Council of Ministers before any effective action can be taken, surely it is possible for the Government to declare tonight that they will instruct the Minister who is attending the ministerial meeting not to take part in a decision tomorrow, and advise the House to adjourn the debate until more facts are available. In that way we can safely adjourn the debate without losing anything we might gain from a perfunctory debate tonight.

Mr. Foot: I must preface every intervention I make with the utterance that I do not regard this procedure as satisfactory. None the less, we are faced with it. The House will hear more fully the facts of the situation if they allow my hon. Friend the Minister of State to speak. If a decision is not reached tomorrow in Brussels the agreement may be jeopardised. The agreement is a valuable one from the point of view of the New Zealand Government.
As I indicated briefly in my previous remarks—and as my hon. Friend will illustrate if he gets the chance—I am not saying that this is a satisfactory way of proceeding; but this is what the House decided when it said that we should have this system of legislation operating. It is all very well for the right hon. and learned Member for Hexham (Mr. Rippon) to shake his head; he assured us that we would not have these difficulties, but now we are landed with them. Those who gave full warning to the House that these things might happen have every right now to ask the House


to show some patience in dealing with the matter, because we are trying to solve the problem created by the Conservative Party.
This is a matter of great importance to New Zealand. I ask my hon. Friends to listen to what my hon. Friend the Minister has to say, and then to listen to what is said by my right hon. Friend when he returns from Brussels. If the House then says that we must have a debate, we must have it; but I must tell the House that under the procedures arranged it is not always possible to ensure that a decision is made by this House before decisions are made in Brussels. That is part of the parallel system created by the right hon. and learned Gentleman.
The right hon. Member who is the Chairman of the Scrutiny Committee has done his best to enable us to escape these difficulties and has given us advance warning, but he will agree that in this case much less time was available. That is a further reason why we are in these difficulties. However, I ask the House to listen to what my hon. Friend the Minister has to say on the merits of this issue. Then let us hear what is said by other hon. Members; then let us deal with the situation that develops from Brussels. We shall no doubt have to have further debates on this matter. This illustrates that this House of Commons must take further steps in the future to try to clear up the mess left by our predecessors.

Mr. Deputy Speaker: I remind hon. Members that the arguments now being advanced were all made during the course of the right hon. Gentleman's statement this afternoon. They were all a rehash of what I heard this afternoon. The case that the right hon. Gentleman has put was the case that he put this afternoon.

Mr. Rippon: Further to the point of order, Mr. Deputy Speaker. The Leader of the House is wrong in saying that this procedure derives from the European Communities Act. We were careful to ensure that the procedures of this House were not bound or fettered in any way. That is why we rejected an amendment designed with that purpose in mind. The procedures of this House are entirely within the control of the House. The Leader of the House has the responsi-

bility for providing time for discussion. If the Government hereafter enter into agreements of any kind on which they have not allowed full discussion in this House they must take full responsibility. They will have to bring their decisions to the House and carry them through here.

Mr. Marten: I want to make a proposal that may help the House. My right hon. and learned Friend the Member for Hexham (Mr. Rippon) mentioned Article 5(2) of Protocol 18, under which the Council of Ministers is required to act on a proposal of the Commission. What we have before us—those who are lucky enough to have the draft proposal —is a series of blanks, which is absurd. If a proposal can be made in a blank form we have the absurdity that a blank piece of paper can be argued as a proposal. That is an important point of principle.
But if this is regarded as a draft proposal the Council of Ministers fills it in and sends it back to the Commission, which then resubmits it with the blanks filled it. It goes to the Council of Ministers for signature, when it becomes law under the regulation.
My point is that between the time when it goes back to the Commission for the figures to be filled in and the time when it again goes to the Council of Ministers it should be discussed in this House. I suggest that the Minister of Agriculture can negotiate ad referendum in this House. That is done in international affairs. I suggest that he does not agree to anything until this House has finally decided on the precise details that have been provided by the Commission.

Mr. Foot: I am not prepared to give the House an undertaking which I am not certain I can fulfil. I cannot say that I could fulfil an undertaking in those terms. I have said that if the House wishes to debate any statement that is made by my right hon. Friend when he comes back, we will consider it, and I would think it right that we should have a debate. But we have not yet devised a procedure by which we can be certain of having debates in this House to settle matters before they are settled in Brussels, and we shall have to apply our minds to


it. Meantime, I suggest that we proceed to discuss this question now.

Mr. J. Enoch Powell: Further to that point of order, Mr. Deputy Speaker. I am not sure that the Leader of the House has fully appreciated the point made by the hon. Member for Banbury (Mr. Marten). The hon. Gentleman raised the proposition that the Council of Ministers is in no position to come to a decision, and that the Minister of Agriculture consequently will not find himself, certainly need not find himself, in any way obliged to participate in such a decision, for it is clear from Protocol 18 that the Council of Ministers can only act in this matter on a proposal from the Commission, and it is equally clear that there is no proposal from the Commission before the Council of Ministers, nor will be tomorrow, since we are assured that, in the proposal, the quantities which are the material subject are left blank, although the brief goes on to state the intention as being that they should be decided by the Council of Ministers.
It cannot, therefore, within the terms of the protocol, be regarded as a proposal from the Commission, which alone can be the basis of a decision of the Council; it cannot be contended that a document from which the crucial matters are missing is a proposal of the Commission. It may well be that the Council tomorrow can discuss the form in which it would like a proposal subsequently to reach it from the Commission, but I suggest—and this may be of material assistance to the Government as well as to the House—that, in the terms of the protocol—that is, of the treaty by which we are all bound—a binding decision cannot be taken by the Council of Ministers on the basis of which regulations are made in the present state of affairs, since there is, within the meaning of the protocol, no proposal from the Commission before the Council.

Mr. Foot: If the right hon. Member for Down, South (Mr. Powell) and the hon. Member for Banbury (Mr. Marten) are correct, there will be another opportunity for the matter to be debated. If that is the case, we will seek to make provision for it. But that is not a reason for the House not to debate the matter before the question is discussed in Brus-

sels tomorrow. We shall have to see whether the right hon. Gentleman and the hon. Gentleman are correct on the subject. If they are correct, it may relieve the situation in some degree, but I am making no undertaking, because I wish to know whether their interpretation is correct. In any case, the House will obviously wish to return to the matter when my right hon. Friend returns. I suggest that the best course the House can adopt, in order to take the best advantage of the time still left, is to hear my hon. Friend the Minister of State and make any comments it may wish to make on the merits of the matter.

12.55 a.m.

The Minister of State for Agriculture, Fisheries and Food (Mr. Edward Bishop): I can appreciate the concern of the House on this matter. I will do my best to be sensitive in my comments and to deal not only with the merits of the case before us regarding the position of the New Zealand butter imports in the three years under discussion but also with the procedural difficulties which face us this evening.
The House will be well advised to follow the guidance given by the right hon. Member for Knutsford (Mr. Davies), who is Chairman of the Scrutiny Committee, as well as that given by my right hon. Friend.
Following the statement this afternoon by my right hon. Friend the Leader of the House, I am sure that the House is grateful to him for finding time at such short notice to debate this matter. I have no doubt that it will be helpful to hon. Members to be able to debate this question before decisions are taken in Brussels. I can give an undertaking now that points made this evening will be conveyed to my right hon. Friend who is attending the Council of Ministers.
I do not wish to minimise the difficulties which have been created by the short notice and I share the concern of my right hon. Friend the Leader of the House that the arrangements we are operating under are by no means satisfactory. In spite of these difficulties it will, however, be useful to hear the views of hon. Members tonight.
As the House knows, this debate arises from a recommendation of the Scrutiny Committee. This point was made clear


by the right hon. Member for Knutsford and my right hon. Friend. The subject is not a new one. Indeed, this matter was considered at length during the renegotiations, and my right hon. Friend the then Prime Minister made a statement in the House on 12th March last year which included the question of New Zealand butter after the Dublin meeting of Heads of Government. The Commission Report, Document R/2099/75, on special arrangements for New Zealand butter after 1977 was considered by the Scrutiny Committee as long ago as last September. Therefore many Members will be familiar with the issues before us tonight. It will no doubt be convenient to the House if this debate also takes in Community Document R/1025/76, available in the Vote Office, which is a factual report on the operation of the Protocol 18 arrangements during 1975.

Mr. Marten: Are we also debating the document which is not available in the Vote Office but which some of us have because we are members of the Scrutiny Committee?

Mr. Bishop: I am referring to Document R/1025/76, which I got from the Vote Office this afternoon and which is available to hon. Members. Throughout the lengthy considerations given to this problem, the Government's aim has always been to secure arrangements which are satisfactory both to the New Zealand Government and to ourselves. But the issues are complex, and, even though slow progress was made in the early stages, matters have moved more quickly in the last few days. I gather from the response of hon. Members that the matter has moved too quickly for our procedures. Some of the difficulties we face tonight will be the basis of a debate which I understand will be held in the House in a few days' time, when the procedural difficulties can be dealt with. It will be helpful if I briefly review the background before coming to the latest proposals which are being put before Agricultural Ministers at this week's Council meeting in Brussels.
It has long been accepted by successive Governments that because of the vital importance of the British butter market for New Zealand, arrangements to allow her to continue to trade with us are essential. It was for this reason

that the previous Government secured the inclusion in the Treaty of Accession of Protocol 18. This protocol specifies the precise quantities of butter that may be imported from New Zealand in each of the years 1973 to 1977 and the arrangements under which these quantities are to be imported into this country.
As to the position after 1977—the matter we are discussing tonight—the protocol in Article 5 required the Council of Ministers during 1975 to review the situation—that is, the working of the protocol concerning butter—taking into account the world market situation and New Zealand's progress towards diversification of its economy and exports referred to in Doc. R/1025/76, to which I referred a few moments ago.
In the light of this review, the protocol states that
Appropriate measures to ensure the maintenance, after 31 December 1977, of exceptional arrangements in respect of imports of butter from New Zealand, including the details of such arrangements, shall be determined by the Council, acting unanimously on a proposal from the Commission".
When the Heads of Government considered this question in Dublin in March last year, during the renegotiation of the entry terms obtained by the previous Government, they called for a Commission report and also for a Commission proposal on the arrangements to apply after 1977.
The Dublin meeting also observed that the quantities to be established after 1977
should not deprive New Zealand of outlets which are essential for it. Thus for the period up to 1980, these annual quantities depending on future market developments could remain close to effective deliveries … in 1974 and the quantities currently envisaged by New Zealand for 1975."—[Official Report, 12th March 1975; Vol. 888, c. 521.]
The House is aware of the statement by the then Prime Minister following the meeting of the Heads of Government in Dublin, where these matters were discussed. The Heads of Government also observed that provision should be made for appropriate adjustment of prices.
The Commission's report and its outline proposal, made in the light of the guidance given by the Heads of Government, are contained in Doc. R/2099/75, which, as I have mentioned, was con-


sidered and noted by the Scrutiny Committee last September. The Commission's preliminary suggestion contained in that document was that the annual quantities might be i29,000 tons in 1978, 121,000 tons in 1979 and 113,000 tons in 1980.
The Council of Agricultural Ministers has discussed this question on a number of occasions but no agreement has been reached either on the quantities or on the conditions under which they would be imported.
It is quite clear that a decision cannot continue to be postponed. Protocol 18 called for the review to be made in 1975 and arrangements decided upon in the light of this. It is now nearly the middle of 1976. Also, from New Zealand's point of view, she needs to know where she will stand from 1977 onwards, in order that she can plan her investments and exports accordingly. These are other factors which show the pressing need for a decision to be made as soon as possible. My right hon. Friend has been pressing for many months for final resolution of this matter, and at the last meeting of the Council of Ministers on 5th and 6th April—despite hesitation by other member States—he was able to secure that at this week's Council meeting an attempt should be made to come to a decision.

Hon. Members: Big deal!

Mr. Bishop: As for recent developments, the Commission produced last week a draft of a Council regulation, and, although the formal text has yet to be received, an explanatory memorandum has been considered by the Scrutiny Committee, of which the hon. Member for Banbury (Mr. Marten) is a member. The draft regulation leaves blank the reference to quantities of butter for each of the years 1978 to 1980. This is because the Council of Agricultural Ministers will have to decide on these taking account of the guidance given at the Dublin meeting and starting from the figures proposed by the Commission which I mentioned earlier. Clearly, I cannot prejudice my right hon. Friend's negotiating position by giving more details now. The fact is that the formula was quoted in the statement to the House on 12th March of last year.

Mr. Rippon: rose—

Mr. Jay: Will my hon. Friend give way?

Mr. Bishop: No, I am sorry. I think that it is essential Mr. Deputy Speaker—

Mr. Spearing: The Minister must give way.

Mr. Marten: This is a debate.

Mr. Rippon: rose—

Mr. Jay: rose—

Mr. Deputy Speaker (Mr. Bryant Godman Irvine): Order. If the Minister remains on his feet, other right hon. and hon. Members must resume their seats.

Mr. Rippon: Will the Minister give way?

Mr. Bishop: The House has very little time in which to debate the matter, and it is important that we should hear the views of hon. Members after my opening statement on behalf of my right hon. Friend.
As regards other provisions which are necessary—

Mr. Rippon: Will the hon. Gentleman give way?

Mr. Jay: Will my hon. Friend give way?

Mr. Bishop: No.

Mr. Rippon: rose—

Mr. Jay: rose—

Mr. Deputy Speaker: Order. It is clear that the Minister is not giving way.

Mr. Norman Buchan: On a point of order, Mr. Deputy Speaker. When your colleague was in the chair earlier, the point was made by the Leader of the House that we should allow the Minister to speak so that we might understand the position. The purpose of these attempts to intervene by the right hon. and learned Member for Hex-ham (Mr. Rippon) and my right hon. Friend the Member for Battersea, North (Mr. Jay) is so that we might understand the position.

Mr. Deputy Speaker: That is a matter for the Minister.

Mr. Bishop: I am not insensitive to the feeling of the House on this matter. But it is important that my right hon. Friend should get to know the views of the House in the debate which is to follow my opening remarks.
As regards other provisions which are necessary, such as the fixing of special levies and marketing arrangements, these follow the system laid down in Protocol 18. These have worked satisfactorily from our point of view and, I believe, also from New Zealand's. What is more, specific provision is made for the adjustment of the price of New Zealand butter, which was agreed at Dublin in the course of renegotiation, and general provision will also be made for the longer-term—namely, after 1980.

Mr. Rippon: rose—

Mr. Deputy Speaker: Order.

Mr. Rippon: Will the Minister give way?

Mr. Deputy Speaker: Order. It is clear to the right hon. and learned Gentleman that the Minister is not giving way. In those circumstances, the Minister will continue his speech.

Mr. Rippon: rose—

Mr. Jay: rose—

Mr. Bishop: Very well. I will give way, first to the right hon. and learned Gentleman and then to my right hon. Friend.

Mr. Rippon: I am obliged to the Minister. This is of some importance. As the protocol was signed in the interests of New Zealand, on behalf of Her Majesty's Government will the Minister assure the House that the Government will not enter into any agreement tomorrow which has not the approval of the New Zealand Government?

Mr. Bishop: The reply to that question is a topic to which I was about to come. We are in very close contact with the New Zealand Government, and they are as anxious as we are that a decision should be arrived at tomorrow.

Mr. Jay: As this whole issue relates to events which will take place after the end of 1977, though no doubt a decision has to be reached soon, why does it have to be reached this week? Why cannot it

be postponed for 10 days, or two weeks in order to give this House time to reach a conclusion on the matter?

Mr. Bishop: I have been stating very clearly in the last few minutes—despite interruptions—the reasons for urgency in this matter. At the Council meeting on 5th and 6th May, my right hon. Friend got an assurance that there was the possibility of an agreement this week.
We do not want this put in jeopardy, and that is why it is so urgent and why the Scrutiny Committee was given memoranda. They gave the Committee some evidence which hon. Members could discuss and on which they could make recommendations to the House.
In considering this proposed regulation in the Council of Ministers, our position is quite clear. It is to safeguard New Zealand's position, built up over many years, as a reliable and important supplier of butter to our market. Therefore, we shall aim to secure provision for quantities in each of the three years 1978 to 1980, which are in accord with the statement following the Dublin Council.
We shall also aim to obtain satisfactory arrangements as regards prices and levies so that the quantities specified can be effectively marketed here on terms fair to New Zealand; and finally we shall aim to ensure that it is understood—and that there is no doubt about this—that provision is made for New Zealand butter after 1980.
These are the terms we shall be seeking. We have kept the New Zealand Government informed of developments during the long period of negotiations on this matter, and the aims I have outlined are, I believe, fully acceptable to New Zealand.
Also, these terms faithfully interpret the important conclusion reached by Heads of Government at the Dublin Council, which was that the arrangements after 1977
should not deprive New Zealand of outlets which are essential to it.
It is now necessary that the Council of Agricultural Ministers should come to a decision, as the uncertainties created by further delay would frustrate New Zealand's investment plans and, therefore, the whole purpose of the arrangements.
I realise that many hon. Members wish to speak in this debate. We want to hear the views in order that they may be transmitted to my right hon. Friend. Therefore, I do not want to take up more time over these opening remarks. The importance of the debate is that hon. Members should be given a chance to speak, and I have tried to summarise the main developments which have taken place over the past year and concentrate on the issues about which my right hon. Friend will be negotiating in Brussels this week.
I can assure the House that I shall see that the views expressed are put to the Minister before final decisions are taken in the Council of Ministers.

Mr. Marten: The Minister of State has said that the draft regulation is not available in the Vote Office, but I have seen a letter in which the Minister of Agriculture says he had the draft regulation in the Ministry on 12th May. Today is 18th May. Why have we still not got the document about which we are talking?

Mr. Bishop: This is a draft regulation which is not officially tabled. The memoranda produced on 10th May and today interpret as faithfully as we can the views which will be put by the Commission.

Mr. Freud: On a point of order, Mr. Deputy Speaker. Is it in order to go on with the debate when we do not know the quantities, the price or the reaction of the New Zealanders to what we are debating?

Mr. Deputy Speaker: That is not a matter for the Chair.

1.14 a.m.

Mr. Francis Pym: The House is in an intolerable situation over this matter, but there is one thing on which we are all agreed—the need to negotiate satisfactory arrangements for continued supplies of New Zealand butter.
However well intentioned the Leader of the House may be, the procedure under which we are holding this debate and the circumstances in which it arises put us in a most difficult situation. It could almost be described, especially after the past three-quarters of an hour,

as something of a parliamentary obscenity. There is not a proposition before us. We are not discussing the firm proposition put by the Commission to the Council of Ministers. We do not know the nature of the agenda or the data. The Commission document is full of blanks. I do not see how we can have a meaningful debate when it is full of blanks.
The Leader of the House has said that it is very important for this debate to take place before decisions are taken in Brussels. But what is it that we are discussing? What is the proposition that is being discussed in Brussels? Surely it is peculiarly awkward for us to take the matter further in the course of the Minister's negotiations.
I take it that the Minister's negotiations began today and have not been concluded. We do not know what stage has been reached, or what discussions have already taken place. When the Minister of State was pressed he ventured to say that he could not possibly prejudice the Minister's negotiating position. I understand that. As I have said, it is difficult to make a meaningful contribution given that the debate is being held tonight.
It is unfortunate that the Minister of Agriculture, Fisheries and Food seems to be rather unlucky in these negotiations, especially in their timing. He seems to be accident prone at the moment. He laughs it off very cheerfully, but it is rather a serious matter. As we all know, he got into great difficulty over the skimmed milk powder negotiations. We do not know what he will come back with tomorrow and we do not know what proposition he is making.
The Leader of the House has said that what the House wishes after tomorrow when the negotiations are concluded is another matter. But that is what the debate is supposed to be about, as well as to give advice.
Is it quite right for the Leader of the House to say that this is a question of short notice, that he suddenly discovered on Thursday afternoon that there had been some discussion in the Scrutiny Committee about arrangements with New Zealand? Was that the first that the right hon. Gentleman heard about the matter? Certainly the discussions reached


the Scrutiny Committee at very short notice as its roneoed report makes clear, but as the Minister of State made clear in opening, it is by no means a sudden matter for the Government to have to consider. The Minister said that the Minister of Agriculture, Fisheries and Food had been pressing his colleagues in the Council of Ministers for many months. He talked about discussions having taken place last September. There were reports in the Press some weeks ago about the amount of butter that might be offered and negotiated by the Community to New Zealand. There cannot be any question of surprise in that context.
Surely it is not quite right for the Leader of the House to say that it is all the fault of the European Communities Act and all prophesised at that time. There are the questions of how the negotiation has been handled, the time when the matter was presented to the Scrutiny Committee and the consideration that the Government have given it. They have known about it for weeks. I do not find myself persuaded that the Government were altogether surprised.

Mr. Foot: If the right hon. Member for Knutsford (Mr. Davies), the Chairman of the Scrutiny Committee, will permit me to quote from the letter he sent to my right hon. Friend the Minister of Agriculture, Fisheries and Food, I may be able to clear up the matter. I do not wish to quote it if the right hon. Gentleman does not wish me to do so.

Mr. John Davies: By all means quote it.

Mr. Foot: This is the letter that the right hon. Gentleman sent on 14th May in reply to a letter sent by the Minister of Agriculture, Fisheries and Food. I think it disposes of all the accusations that the right hon. Gentleman for Cambridgeshire (Mr. Pym) is making. The letter reads:
In my view"—
this is the right hon. Member for Knutsford, the Chairman of the Scrutiny Committee—
this situation has arisen because of a fault in the Commission's machinery. If the Council agreed the line on 5th-6th April, it is difficult to imagine why the document did not appear before 12th May—particularly as it still does not specify the amount of the quotas".

I think that that helps to dispose of some of the charges of the right hon. Member for Cambridgeshire. I add that it is certainly the fact that I first heard about this matter on Thursday. As it is my responsibility to try to ensure that debates take place in the House before decisions are made, I thought that we should have to make arrangements for a debate, and especially because of the representations of the right hon. Member for Knutsford. It is true that the right hon. Gentleman said that it might be better to have a debate afterwards. However, we thought it would be necessary to carry out the obligations we have to the House to have the possibility of a debate beforehand.

Mr. Pym: I have no doubt that if my right hon. Friend the Member for Knutsford (Mr. Davies) catches your eye, Mr. Deputy Speaker, he will wish to comment on the exchange of correspondence he has evidently had with the Minister of Agriculture, Fisheries and Food.
I would not presume to criticise the Leader of the House for arranging this debate now, in the light of the fact that he himself discovered the reality of the situation on Thursday. I do not dispute that for a moment. However, I think that he should have known. I think that the Government machine should have worked in such a way that he, being the head of the Government legislative machine and knowing what was coming through the pipeline, should have been aware of it. It should have been possible for the Scrutiny Committee to look at the matter earlier. This matter could have been handled in such a way that the debate for which the right hon. Gentleman has now provided time could have taken place at a more reasonable time in advance of the current negotiations. One thing that has emerged from the exchanges this evening is that the Government and New Zealand want the negotiations to be completed now, and therefore the proposition made by the right hon. Member for Battersea, North (Mr. Jay) that this matter be put off for a fortnight does not sound very helpful.

Mr. Foot: Will the right hon. Gentleman give the House a simple answer to this question? Does he agree with the statement by his right hon. Friend the Member for Knutsford (Mr. Davies) that


in his view this situation has arisen because of a fault in the Commission's machinery?

Mr. Pym: That may be perfectly true. I am not competent to pass a judgment on that, but I would not deny that. The Government have links with Brussels every day. They have a permanent staff at the Commission. They know what is going on. There are communications. They have been talking about this butter deal with New Zealand for months. It has been on the agenda for a long time. It could not have come as any surprise to the right hon. Gentleman.
I do not accuse the right hon. Gentleman personally of any failure. I say simply that the system as I understood it and as it used to work should have provided him with advance notice of this matter.

Mr. Bishop: On this point, which does not concern procedure so much, may I say that I am assured that the information which was given in the memorandum was available to the Ministry only on the day on which we gave it to the Scrutiny Committee? This is a very important point. The information was phoned through to us from Brussels. We thought that the Scrutiny Committee should have the information at the earliest opportunity.

Mr. Pym: I feel sure that that is right. Obviously there is a flaw here. Everybody agrees about that. All that I was saying was that, after all that has been said, particularly by the Minister of State, it is not a very credible proposition to argue that suddenly last Thursday out of the blue everybody was taken by surprise.
We cannot debate the substance of the matter in any meaningful sense. The Minister of State has indicated that the proposition was put forward tentatively some time ago as a basis of discussion. I have no idea whether these figures hold in the current negotiations. In the light of supplies from New Zealand in 197475, the figures the Minister of State quoted, beginning with 129,000 tonnes in 1978, do not seem to be unreasonable. They seem to be on the right lines. Last year more than a quarter of the butter imported into the United Kingdom came from New Zealand. That is a trade we wish to continue. I might add that it

is cheaper butter as well and the British consumers are very grateful for that.
It is fair to remind the House that on 12th April the Prime Minister of New Zealand, when he was talking about relations between his country and the European Community, said this:
New Zealand does not seek the dismantling of the common agricultural policy of the EEC … New Zealand can produce and ship across the world food products and market them here"—
that is, in the United Kingdom—
in a strikingly competitive fashion. It is in the interests of both the Community and New Zealand that there remain the widest scope possible for us to sell our meat and dairy products here … It is simply a matter of maintaining a productive and balanced two-way relationship. What is good for us is we suggest also right for Europe.
New Zealand is keen to maintain that trade, and both sides of the House are keen to maintain it. There is our Minister tonight in an embarrassing position and we have to rely on him at this stage to come back with a deal that the House will regard as satisfactory.
One of the things that were incredible about the negotiations over the milk surplus was that when the Minister came to the House he was not himself prepared to defend it, let alone find anybody else who was prepared to defend it. I hope that when the right hon. Gentleman comes back with a deal tomorrow—if a deal is made—he will be prepared to defend it, even if nobody else is. I do not think, after the early lesson, that he can be in that position again. What we want him to do is to complete a satisfactory negotiation which the whole House will feel is satisfactory.
To be fair to the Minister of Agriculture, he of all people has taken a great deal of trouble about trade with New Zealand. He has interested himself in that country. He has been there, he has helped the New Zealanders and done everything to support them, and we are justified in thinking that he will do the best that he can. But it is not the right hon. Gentleman's keenness and enthusiasm for New Zealand that will guide matters but the relationship between himself and his colleagues in the councils of Europe. One of the problems is the comparative weakness of the Government in the councils of Europe compared with the situation under the previous Conservative Government, and that


is unfortunate. That is very much my view.

Mr. Marten: This is important, because the Minister has promised to transmit the views of the House to the Minister of Agriculture in Brussels today. The Leader of the House referred to the letter from my right hon. Friend the Member for Knutsford (Mr. Davies) who did not object to its being read, but he did not read the last paragraph, and that is what I should like to do. My right hon. Friend said:
May I suggest to you that the best way forward would be for you 
—that is, the Minister of Agriculture—
to go forward with the negotiations next week but not to give final agreement to the instrument until you have made a report to the House and a debate has been held. Presumably this could be done quite quickly.
That is the message from the Chairman of the Scrutiny Committee that ought to go through the Leader of the House to the Minister in Brussels. Would my right hon. Friend agree to that?

Mr. Pym: Basically I would. Nobody who has not been involved in the negotiations week after week, as the Minister of Agriculture has been in the Council of Ministers, can know precisely what has been said, what stage the discussions have reached, or where we are. And that goes for my right hon. Friend the Member for Knutsford and my hon. Friend the Member for Banbury (Mr. Marten). How can they know the state of play in the Council of Ministers? They cannot do so, but the Government and the Leader of the House can. The right hon. Gentleman can know because he has only to ring his right hon. Friend and find out, and that is how it ought to work.
If it were possible in the context of that and the Council of Minister's negotiations to do what my right hon. Friend has suggested, namely, to come to a conclusion but not seal it, bring it back to the House and, hopefully, obtain agreement and then go back and have it endorsed, without putting a satisfactory agreement at risk, that would be the right thing to do. but what we want out of all this, apart from a change in our procedure, about which the Leader of the House was forthcoming, is a satisfactory deal for New Zealand for the supply of butter. [Interruption.] Hon. Gentlemen below the Gangway are getting very

excited. There is no reason why the Minister of Agriculture should not negotiate a deal that will be regarded as satisfactory, and that is what we must hope he will achieve tomorrow.

1.29 a.m.

Mr. Nigel Spearing: Many of my hon. Friends will not have much sympathy for the right hon. Member for Cambridgeshire (Mr. Pym) because long ago he was told that we should be in difficulties of this sort. I leave the right hon. Gentleman and go to my hon. Friend the Minister of State.
The memorandum to which my right hon. Friend referred in his speech also refers to the important document R/2099/75 dated 31st July 1975, which contained the first thoughts of the Commission on this matter. Indeed, it is the only document that the House has before it on the response of the Commission to the Dublin agreement.
In his explanatory memorandum to R/2099/75, which was, incidentally, undated, despite requests made for the dating of signatures, my hon. Friend tells us that in 1978 we can expect 129,000 metric tons of butter from New Zealand; in 1979, 121,000 metric tons; and in 1980, 113,000 metric tons. The report recognises the difficulties which New Zealand faces in finding alternative markets, in diversifying, and the need for continuing access to the United Kingdom market in line with the Dublin communiqué.
Why is it that this document R/2099/75 has been substituted by a document we have not seen? Why is it necessary for a 40-page document which goes into this very fully suddenly to be swept away, apparently since last Thursday? Apparently this has been the initiative of the Commission.
But there is something more important than that. My hon. Friend referred to Hansard of 12th March 1975 relating to the Dublin agreement. It says,
these annual quantities depending upon future market developments, could remain close to effective deliveries under Protocol 18 in 1974, and the quantities currently envisaged by New Zealand for 1975."—[Official Report, 12th March 1975; Vol. 888. c. 521.]
What were those quantities "currently envisaged by New Zealand for 1975?"


For once the Commission is helpful. The document states in paragraph 36:
New Zealand envisaged sending about 125,000 metric tons in 1975.
As I have just read out from the Dublin communiqué, that is the order of the figure we may expect in the future. The communiqué says
could remain close to effective deliveries, and the quantities currently envisaged by New Zealand.
My hon. Friend has said the Minister will see that New Zealand is all right. But will he say whether the Minister will accept figures less than those in the document R/2099/75, and are they less than the 125,000 metric tons envisaged by New Zealand in 1975? He owes it to the House to tell us what is in his mind. It is not a matter of giving way on negotiating rights because these figures are in the document. If necessary my right hon. Friend should be prepared to use the veto written into Protocol 18, because that Protocol requires unanimity.
These are matters to which my hon. Friend should reply, because they are matters of honour in the discharge of the Dublin renegotiations to the people of New Zealand who send us good butter at about half the price of that from the EEC.

1.33 a.m.

Mr. John Davies: I do not want to detain the House very long, but there are two matters which I want to raise—a procedural matter, and the problem of New Zealand butter.
On the procedural side, it is right to say that the Community system as it applies in most other domains is certainly differently handled in relation to the agricultural matters. Because of the nature of the discussions in the Council of Ministers of Agriculture there is great freedom of action allowed to disuss the issues embodied in the Commission's proposals, which are subsequently adopted. That is the defect of the Commission system.
Having said that, the truth is that the Minister on his own admission, in his letter to me, agreed that on 5th and 6th April a broad understanding was reached at the meeting currently taking place and that a conclusion would be arrived at in the knowledge of the way in which that Council works. It would have been open to the Minister to make, there and then,

an explanatory memorandum to the House of Commons. Then it would have been possible for the Scrutiny Committee to take advice from the Minister in the form of evidence. The evidence then would have been available of the Minister's view of the whole discussion, and the House would have been able to have a meaningful debate in good time to get the view of the Minister.

Mr. John Roper: I take it that the right hon. Gentleman is aware that my right hon. Friend the Minister of State for Foreign and Commonwealth Affairs, in making the Business statement to the House at the end of April about what was to come before the Council of Ministers during May, put imports of New Zealand butter in 1978–80 at the top of the list of subjects coming before agriculture Ministers. Therefore, the House—as distinct from the Scrutiny Committee—has known since the end of April that this subject was coming before the Council this month.

Mr. Davies: That is correct, but that is not my point. My point is that the House could usefully have had a clear indication about all the Ministers' views on this proposal. It would then have had the means to debate the subject and something positive to discuss.
There are many experts in the House about imports of New Zealand butter, but it is hard to imagine that many hon. Members could adequately forecast the likely level of butter or cheese imports in 1978, having regard to the then state of the world market in those products and this country's requirements of them, with or without the current consumer subsidy.
The reality of the figures can be interpreted only in the light of the Minister's own view of them and his observations upon them. The House does not have that. This procedural aspect is clearly important because in matters where the Commission does not work in the normal way as I have described it, it is incumbent upon the Government to make sure that the House is possessed of enough information to be able adequately to debate these matters. At present we are having a debate largely in the void, and that is valueless because in those circumstances the House cannot convey its views in any real sense to the Government Front Bench.
Equally, I believe that it would be possible for the Minister in absolute good faith to carry forward his negotiations virtually to finality at the current Council of Ministers meeting in Brussels. It would have been well understood that the House, which has shown consistently over many years such a great interest in the outcome of negotiations on this issue, would wish to be kept informed and to make observations before the final curtain dropped on the matter.
My experience of dealing with the Council of Ministers tell me that such a request would not have been treated as extraordinary or abnormal. It would have been treated as normal in the circumstances, and that was why in my letter to the Minister I suggested that that was the best formula to follow. I regret that he found that impossible because otherwise we should not have been having this debate now. I do not think that in the circumstances it would have been damaging to the negotiating position of the Government to take that view. They could well have risked it on the basis of the well-known interest of the House in the outcome of the negotiations. Perhaps in considering the matter further the Leader of the House will be prepared on subsequent occasions to consider such a formula should it ever be necessary. I hope that it never will. The arrangement which we have tonight seems totally undesirable. We have to debate the subject without knowing what has happened in the Council. For my part, I deplore this because I think that the procedure is wrong. I also deplore it because it is so easy to give the wrong impression from the point of view of New Zealand. Our interest is that New Zealand should have a good deal in this arrangement.
I very much hope that the tone of this debate is not allowed to reach the Minister or any outside body in a way which suggests that the House is critical of the desire to get an adequate and consistent agreement for New Zealand.

1.41 a.m.

Mr. John Mendelson: There is no time to make any comment on the procedural matter with which the Leader of the House has promised to deal, except to say that there is a need to do so and that he will have the co-operation of

right hon. and hon. Members in attempting to do so.
I would confine myself to the issue concerning New Zealand and the interest, both of New Zealand and the people of this country, in the continuation of imports of butter and other dairy products to this country. It follows naturally from what the right hon. Member for Knutsford (Mr. Davies) said that the anxiety which he expressed is shared by my right hon. Friend the Minister for Agriculture, the Government and all hon. Members. One understands the feeling that there might be some danger to this agreement because of the unfortunate circumstances which have led to this unsatisfactory state of affairs this evening. I say this because I am almost as critical as are any other hon. Members at what we face, constitutionally speaking.
But this has impressed upon me not to demand the postponement of the debate, because anything which might jeopardise the conclusion of the agreement, to the detriment of both New Zealand and the people of this country, would be a serious matter.
I think the House must insist upon the Government making a clear distinction between the kind of negotiations which go on all the time between agricultural ministers where they are, in fact, acting as a legislative agency—the Council of Ministers being both the legislative and the executive organ of the Common Market at one and the same time—as well as acting as a meeting of Ministers. That is the problem. It creates all the difficulties because, naturally, Ministers feel that when they are negotiating, everything must be very confidential. It is the sort of carry-over from the negotiations normally engaged in by Foreign Ministers. Therefore, if everything is to be termed "confidential" the later one tells the House of Commons the better.
But that is exactly the wrong recipe for the discussions now taking place with the Common Market. The attitude must be the exact opposite. It must be that the earlier one tells the House of Commons, the better, and the more one brings the House of Commons into one's confidence, the better.
I would echo something already hinted at by my right hon. Friend the Member for Battersea, North (Mr. Jay). Let us


make a start on what is possibly the most important example which the House has faced so far—imports from New Zealand. If we can do so without jeopardising the agreement, let us say to our Government that they should ask the Council of Ministers not finally to conclude the agreement tomorrow. Let the views expressed in the House of Commons be conveyed to the Minister representing the British Government, as suggested by the Leader of the House earlier tonight and yesterday afternoon. Let it be done genuinely and not as a diplomatic facade. Let our views, concern and desire be known and then let the Minister, having taken note of those views, ask that the final decision be postponed by a few days, so that on this important example we should have exercised the rights of the House of Commons to take part in the process of concluding an important agreement which involves both the people of this country and those of another country, which is particularly close and dear to the people of Great Britain. That is the most important aspect of this debate.
For the rest, the right hon. Member for Cambridgeshire (Mr. Pym) will have to be more modest in making accusations on these occasions. Tonight is not the time to remind him and his right hon. and learned Friend the Member for Hexham (Mr. Rippon) and their colleagues about the warnings given to them when they were in Government when the House was asked to approve our entry of the Common Market. He should not make accusations about my right hon. Friends being weak and feeble in the negotiations. All these things were predicted when the lines were laid down by him and his right hon. Friends.
But all that does not matter much. What matters tonight is finding the right approach, to make the right message available to the Minister who is negotiating and to try to make the best use of the difficulties we face tonight.

1.46 a.m.

Mr. J. Enoch Powell: I join the hon. Member for Penistone (Mr. Mendelson) in the hope that the course of action indicated by the right hon. Member for Knutsford (Mr. Davies) —a course of action which I believe to be legally as well as practically possible—will be followed and that the one message

which will be sent, if the electric telegraph is still working, to the Minister is in the sense of the words used by the right hon. Gentleman.
The Minister repeatedly said that the purpose of this debate and of all such debates is to enable the views of the House to be known to the Government. It is what the right hon. Member for Knutsford commended which is the sole view of the House that could emerge from this debate. For of course there is an essential difference between the view of the House, which properly speaking can be ascertained only when there is a proposition before the House to which the House either assents or dissents, and the views of individual Members who may happen to be called. It seems to me that we should never fall into the trap of confusing the views of individual Members with the view of the House, which is something with a definite and constitutional meaning.
The invitation which was addressed to the House by the Minister was one with which it was impossible for the House to comply in any sense of that invitation. The Scrutiny Committee, at its meeting, gathered from the Ministry of Agriculture that the instrument which would be put before the Council of Ministers recommended three quotas—129,000, 121,000 and 113,000 tonnes. It is the size of those quotas which are the subject matter of the whole debate and the subject on which a view would fall to be expressed by the House.
But in a footnote, we read:
The Committee have since learned that the working document concerned contained no figures as to the recommended quotas.
The Committee therefore understood
… that the annual quotas proposed are not necessarily those that the Council will in fact consider.
So for the Scrutiny Committee, the whole basis of a decision for the House was knocked away before its report could reach the House.
But for good measure, the latest updated memorandum from the Ministry of Agriculture informed the House:
The quantities are left blank in the proposal
which will go before the Council,
the intention being that they should he decided by the Council.
So it was at all times impossible that this House should express a view, since


the subject on which it was to express a view was withheld from it and was not placed before it.
But there is more to it than that. The Minister tonight declared that it was no intention of his to disclose what was his right hon. Friend's negotiating position. In other words, not only was the House not told the proposals of the Commission to the Council, but the House is not to be told what the Minister of Agriculture wishes to obtain because, says the Minister, that would prejudice his negotiation. So there is no reality from either point of view in the notion that we are being invited to express a view to the Government or that there is any ordinary sense in which the Government can listen to our view.
All this is, as I suggested earlier on a point of order, at variance with the clear procedure laid down in the Treaty of Accession, a procedure which runs right through the Treaty of Rome and which one might almost call the constitutional provisions of the European Economic Community. That is that, not always but generally and certainly in this matter, the Council has to act on a proposal from the Commission. Consequently, the Council cannot legislate suo motu; it has to legislate on a written proposal which is before it, and there is provision for what is to happen if the Council disagrees with that proposal. If it disagrees, the proposal has to come back to the Commission so that it can be resubmitted in a form which will eventually be accepted by the Council.
No procedure could be more orderly, nor could there be any other procedure which affords to this legislature or the legislatures of the other member States the opportunity of participating in the work of the Community and exercising control over their respective members of the Council. It is that procedure which in this case has been abandoned, whence I deduce that a lawful regulation cannot be made tomorrow by the Council. I also deduce that if that procedure is followed in future this House and the other legislatures in the Community will have before them in advance that which it is proposed that their representatives in the Council should assent to.
Lest I should appear to suggest that by following the procedures embodied in the Treaty of Accession and the Treaty of Rome we shall escape from our difficulties, let me say that of course the Minister was speaking the truth when he talked about the right hon. Gentleman's negotiating position. I remind the House that there is no ultimate reconciliation between the Council of Ministers acting as a single body upon collective responsibility, on one hand and, on the other hand, the ultimate power of the House to call to account, to give directions to and to admonish Her Majesty's Minister who takes his place in the Council. Ultimately, the two structures are irreconcilable, and ultimately the House and the country will have to make up their mind which it is to be; whether it is to be governed in a unitary European State by the common responsibility of its organs of government, or whether we are to continue to exercise our responsibilities on behalf of those who sent us to this place.

1.54 a.m.

Mr. Neil Marten: I realise that we have only eight minutes left and I merely wish to put one point to the Minister. Many points have been raised in the debate to which we do not expect immediate answers. Indeed, I do not think that the Minister knows the answers to many of them. All that my hon. and right hon. Friends want the Minister to say is what message will be passed to the Minister tonight. Is it the message that my right hon. Friend the Member for Knutsford (Mr. Davies) put at the end of his letter—that the Minister should come to this House and let us comment on what he has negotiated? Or is it the message that almost the whole House has recommended?
I imagine that that is the only message that the Minister can transmit—that he will not agree to anything tomorrow without this House having a chance to debate it. Will the Minister please give the House an assurance that that is what he will do?

1.55 a.m.

Mr. Bishop: The House has had a useful debate. Its purpose was in keeping with the wish of the Scrutiny Committee that the matter should be debated before being decided in Brussels.

Mr. Freud: Will the Minister be kind enough to explain in what way this has been a useful debate?

Mr. Bishop: If the hon. Member is saying that the House should not debate the matter before the Minister considers the matter in Brussels, he should say so. Thanks to my right hon. Friend and the recommendation of the right hon. Member for Knutsford (Mr. Davies) the House has had the opportunity, at very short notice, to debate this matter.
The debate has been a useful one in giving the views of the House on the matter following my opening remarks in relation to the procedure and other aspects of the case. We have said that it is in New Zealand's interests that the matter should be resolved in the light of the Dublin Declaration.
When the right hon. Member for Cambridgeshire (Mr. Pym) spoke about the Government's undertaking in terms of the Community I drew attention to the fact that on 12th March last year my right hon. Friend the then Prime Minister acquainted the House with details of the European Council meeting which had been held in Dublin, where he was responsible for the present Government taking the necessary safeguards to protect the New Zealand butter interest. My right hon. Friend said that
On New Zealand dairy products, the Heads of Government were concerned not with the detailed arrangements for access after 1977 but with laying down the political guidelines on which the decisions on these matters are to be prepared. These represent a substantial improvement on the existing protocol. First, it was agreed that annual imports of butter for the first three years after 1977—from 1978 to 1980—may remain close to deliveries in 1974 and 1975."—[Official Report, 12th March 1975; Vol. 888, c. 511.]
These are the guidelines, and it is because my right hon. Friend negotiated that position before the referendum that the House is able to debate this matter tonight and the Minister is able to hold the other members of the Community to the assurances given on that occasion. If these negotiations had not proceeded as they did, the New Zealand position would have been in great doubt.
But we are concerned not only with the position from 1978 to 1980; we are concerned with the period beyond that. The figures that I have quoted—the guidelines laid down, which are part of

Protocol 18—are the basis on which the negotiations are proceeding at present.
When hon. Members say that there is no hurry about this, I remind them of the points that I made in my opening remarks—that at the meeting of the Council of Ministers on 5th and 6th April of this year my right hon. Friend secured the assurances of his fellow Ministers in the Community that a decision could be reached at the Council meeting that is taking place at present. My hon. Friend the Member for Newham, South (Mr. Spearing), among other points, asked about the status of the document—R2099/75—and why it was replaced. I remind him that the document represented the Commission's report, required under Protocol 18, to which I have referred and to which the Dublin communiqué referred, which provided the basis for a settlement after 1977. So, when the right hon. Gentleman talks about the weakness of the Government, I remind him that it was the strengh of the Government in the negotiations which gave the basis for the assurances which can now be made.
The right hon. Member for Knutsford raised the question of the availability of the information. I remind him that the information on which the memorandum dated 10th May was based was obtained only the day on which it was made available to the Scrutiny Committee. I have stressed that the Commission was aware from the date of the negotiations in Dublin in March last year that these arrangments had to take place. It is unfortunate that the Commission was unable to resolve the situation sooner than it did. It was the availability of the memorandum before the Scrutiny Commitee last week which gave that Committee the opportunity to consider such information as was available and the House the opportunity to consider the matter tonight.
The points raised tonight can be debated later this week when the House considers the statement which may be made by my right hon. Friend the Minister of Agriculture.

Mr. Marten: The hon. Gentleman has not told us what message is to go to the Minister of Agriculture today. That is the whole point of the debate. We want to know precisely what the Government are to tell the Minister. Will


the hon. Gentleman come clean and tell us?

Mr. Bishop: I am not sure what the hon. Gentleman—

It being one and a half hours after the Motion had been entered upon, the motion for the Adjournment of the House lapsed, without Question put.

EUROPEAN ASSEMBLY (DIRECT ELECTIONS)

Motion made,

That Mr. George Reid, Sir Anthony Royle and Mr. David Steel be members of the Committee on Direct Elections to the European Assembly:

That the Committee have power to send for persons, papers and records, to report from time to time and to sit notwithstanding any Adjournment of the House:

That Four be the Quorum of the Committee.

Mr. Deputy Speaker (Mr. Bryant Godman Irvine): The Question is,
That Mr. George Reid—

Mr. Norman Buchan: On a point of order, Mr. Deputy Speaker. During the earlier points of order—

Mr. Deputy Speaker: Order. I am proposing a Question in accordance with the instruction of the House.
The Question is,
That Mr. George Reid, Sir Anthony Royle and Mr. David Steel be members of the Committee on Direct Elections to the European Assembly:
That the Committee have power to send for persons, papers and records, to report from time to time and to sit notwithstanding any Adjournment of the House:
That Four be the Quorum of the Committee.

Mr. Buchan: On a point of order, Mr. Deputy Speaker. My point of order is not connected with this motion but with the previous Adjournment motion. During the earlier points of order, it was explained by the Leader of the House that the purpose of that debate—and we thank him for it and understand that the situation is not his fault—was in order that the Minister of Agriculture would understand the feeling of the House on the issue.

Mr. Deputy Speaker: Order. I am the servant of the House. The Business Resolution set out one-and-a-half hours for the debate on New Zealand butter, and that time has now expired. That business has therefore been concluded.

Mr. Buchan: But, with respect—

Mr. Deputy Speaker: Order. That business has been completed. We are now on the next business, and if the hon. Gentleman has anything to say on that next business I am prepared to hear him.

Mr. Buchan: With respect, Mr. Deputy Speaker, it was precisely because the business had passed that I raised this as a point of order. If the business had not passed I would have raised it as an intervention. The point of order I am putting is whether—

Mr. Deputy Speaker: Order. The hon. Gentleman is not able to raise a point of order on business which has already passed. We are now discussing the question of the Select Committee. I am prepared to hear the hon. Gentleman on that, but not on some other point of order.

Mr. Buchan: In that case, may I raise a point of order on the question of the Select Committee? I wonder whether an opportunity can be taken by the Leader of the House in introducing this subject to let us know what message he will be conveying to the Minister of Agriculture—

Mr. Deputy Speaker: Order. The hon. Gentleman is getting a little further out of order. That point would certainly not be in order on this issue.

Mr. J. Enoch Powell: On a different point of order, Mr. Deputy Speaker. On 12th May at col. 614 of the Official Report, when you put the larger motion, of which that on the Order Paper today is a fragment, you indicated that you intended to put separately the Question or the remaining members of the Committee and separately the Question on what were then paragraphs three and four of the motion. May I inquire why it is that that procedure which you indicated and which you were interrupted in the course of carrying through is not applied this


morning and why, therefore, the Question which you have proposed to the House is not initially limited to the first two lines of the motion which stands on the Order Paper in the name of the Deputy Chief Whip?

Mr. Deputy Speaker: If it is for the convenience of the House that the motion should be dealt with line by line or clause by clause, that can be done.

Ordered,
That Mr. George Reid, Sir Anthony Royle and Mr. David Steel be members of the Committee on Direct Elections to the European Assembly.—[Mr. Walter Harrison.)

Motion made, and Question proposed,
That the Committee have power to send for persons, papers and records, to report from time to time and to sit notwithstanding any Adjournment of the House.—[Mr. Walter Harrison.]

2.8 a.m.

Mr. Roger Moate: In view of the lateness of the hour and the fact that this is the second instalment of this debate I do not wish to speak at length. I believe that a further debate on the subject is important and could be helpful. There are a number of issues that should be further explored before the Select Committee is set up. There are some answers to which we are entitled from the Government before this important Select Committee sets out on is work.
I appreciate that the debate is restricted to the words on the Order Paper, which relate basically to the powers of the Committee to send for persons, papers and records. These are important powers and it is important to know exactly how the Committee can exercise them and what constraints might be placed upon it. Certain very important matters could flow from the proceedings of the Committee. Considerable consequences for this country and for our electoral arrangements could certainly flow from them. While, clearly at a later stage, it will be for the House to decide upon these arrangements. presumably through legislation, undoubtedly the recommendations of the Committee will carry great weight when we come to prepare that legislation. It is important to know that the Select Committee will be considering certain matters and will have the power to make recommendations to the House

based on a considerable amount of information that it might be empowered to obtain.
I presume that the Leader of the House will be replying. That is something I would welcome because I am sure that he will do his utmost to give us full answers.
My first question concerns the future position of Members of the European Assembly, or European Parliament, if that is what it is to be called. Presumably the status and the remuneration of European Members of Parliament is a direct consequence of the electoral arrangements which the Select Committee has to consider.
The importance of this, I hope, will be self-evident. Certainly it has already been suggested that Members of the European Assembly could be very highly remunerated persons. There has been talk of salaries of some £20,000 per annum. The other day I even heard a suggestion that it could be £30,000 per annum. I am told that it will be the mean or the average of salaries paid to members of existing national Parliaments in Europe, and certainly it seems that, whatever the figure, the Members will be very highly paid persons.
The same argument applies to their expenses. It is said, too, that they will have a very large staff. Comparisons are made with senators of the United States. If this is to be the case—

The Lord President of the Council and Leader of the House of Commons (Mr. Michael Foot): On a point of order, Mr. Deputy Speaker. I should like to have your ruling about the matter, because it obviously affects what we discuss. I suggest that we are discussing a very narrow question indeed—whether papers should be sent for, and so on. The hon. Gentleman seems to be entering into general questions of merit which might have been in order in the earlier part of the discussions, but we are now discussing a very narrow point. I am not suggesting that the hon. Gentleman has not the right to raise it if he can, but I should have thought that it must be done within the rules of order.

Mr. Deputy Speaker: The right hon. Gentleman is absolutely correct. I was waiting to see whether the hon. Gentleman brought himself into order very speedily. I hope that he will do so.

Mr. Moate: Thank you, Mr. Deputy Speaker. I hope that the point that I am about to make will be seen to be in order, because if it was out of order in this context it might be said that it was out of order for the Select Committee to consider it, and that would be a very serious matter. As I understand the situation, the matter to which I have just referred might well be decided by the existing European Assembly and not even influenced by the national legislatures—

Mr. Deputy Speaker: Order. There is nothing in the paragraph which we are discussing which is in any way connected with what the hon. Gentleman is saying.

Mr. Moate: My whole purpose, Mr. Deputy Speaker, is to ask whether the Select Committee would have power to summon before it persons in the European Assembly currently engaged in preparing proposals for the remuneration of Members of the European Parliament. This is of fundamental importance. If this is a matter upon which the Select Committee is competent to judge and make recommendations to the House, one wishes to be assured that it has the power to summon those who apparently have the responsibility, if that is the case, for making recommendations of this kind.
I hope not only that you will accept that that is in order in the way I have framed it, Mr. Deputy Speaker, but that the Leader of the House will confirm that that power exists.
My next point concerns numbers. Clearly the electoral arrangements—

Mr. Deputy Speaker: Order. The hon. Gentleman is referring to the debate that we had on the first day that we discussed this Order. There is nothing now in order in relation to that.

Mr. Moate: Again it is a question of the exercise of power to summon persons or to obtain papers or records relevant to the matters I am discussing. I hope that, with regard to remuneration, I have established the point that I should like to know whether the Select Committee is empowered to summon such people. I should like to know whether it has the power to summon persons to comment on the taxation to which Members of the European Parliament will be liable. Again, we are seeing the build-up of a

privileged class of international persons who are very highly paid and very lowly taxed. Has the Select Committee the power to bring before it persons concerned with the tax levied on European Members, whether they be in this country or abroad?
Again, I hope that that will be seen as a point to which the Select Committee will give great attention. If it has not the power to summon such persons, the situation will hardly be tolerated by this House or by the people of this country when they see such matters upon such sensitive issues escaping from the influence of the United Kingdom Parliament. I hope very much that the Leader of the House will confirm that the Committee is so empowered to summon such people before it.
May I turn to another matter upon which I hope that the Select Committee will have the power to summon persons before it, and that concerns very directly the electoral arrangements—the number of Members of the European Parliament. We know that there will be a variety of options—

Mr. Deputy Speaker: Order. I suggest that the hon. Gentleman looks at the original motion. I think that he will find the answers contained there.

Mr. Moate: If, by that, I am to understand that the Committee has such powers on all these matters, I am very content. If that is your ruling, Mr. Deputy Speaker, so be it. I had expected to receive it from the Leader of the House. But I am concerned to ensure—

Mr. Deputy Speaker: Order. The hon. Gentleman had his opportunity to raise these matters when paragraph 1 of the motion was dealt with. We are now down to about paragraph 6, and this is a very narrow point about sending for persons and papers.

Mr. Moate: Then I have endeavoured to make the points that I sought to make, namely, I wished to receive confirmation from the Leader of the House that the Select Committee would have such powers to summon people before it to deal with such matters as the numbers, and I was about to say even to summon persons from, say, Greece, because the Greeks might wish to become members


of the EEC. Will the Select Committee have the power to send for witnesses from Greece to seek their views on the number of Members they would like to see representing Greece in the European Assembly?
On all these crucial issues, which must be translated at some stage into legislative arrangements for the United Kingdom, I trust that the Select Committee will see that it has power to summon people before it and the duty to deal with these matters when it comes to making recommendations to the House of Commons.

2.18 a.m.

Mr. Neil Marten: My hon. Friend the Member for Faversham (Mr. Moate) has been alongside me in our discussions of the Common Market over a number of years, and perhaps this is the moment to pay tribute to him for what he has just said.
We are discussing persons and papers, so I shall confine myself and remain strictly in order. On the question of persons, if the Committee should wish to summon an official of the EEC Commission, for example, can the Leader of the House tell us how far our writ and right runs? Can we compel a member of the Commission to come here? Secondly, can we compel Ministers of foreign Governments to come before the Select Committee? If that were possible, we should have some very interesting and diverse views expressed by the various Ministers on direct elections.
Could we, for example, summon the Vice-President of the Common Market Assembly, who I gather is another of these Communists in the organisation out there? I have in mind Commissioner Spinelli, for instance. It would be interesting to get the views of the. Communist Spinelli, Vice-President of the European Parliament.
Then there is Mr. Patijn, the initiator of the proposal in February 1973 or 1974 that we should have a European Parliament. He was the initiator of the size of it and the way it was to run. Could we call him as a witness? Could we call the Gaullist Party representatives who want 198 seats and no more? They are obviously blocking the whole thing—bless them—and they are very relevant to the Committee because the Govern-

ment have said they wish to proceed speedily.
I have heard a rumour that the Government want the Committee—which is meeting later today although this motion has not yet been passed by the House—to produce an interim report by 24th June. That seems an extraordinarily early date to me and there would be no chance of achieving it if we had Gaullist Party representatives giving evidence because they are blockers par excellence.
Shall we be able to ask the Foreign Office for the papers it circulated among officials who cooked up this project within the Foreign Office's dream of federalism?
May we have the minutes of Council of Ministers' meetings? If there is one thing our Committee should get its hands on it is the minute book of the Council of Ministers' discussions about how many seats there should be in the Assembly. Could we call the Foreign Secretary before the Committee? Perhaps he could tell us what happened last week at the casual, but secret, get-together for a weekend in the country to discuss direct elections to the European Parliament.
I do not wish to detain the House. It is getting rather late. But this is the sort of information we ought to have before approving the motion.

2.22 a.m.

The Lord President of the Council and Leader of the House of Commons (Mr. Michael Foot): I am most grateful for the determination of the hon. Member for Banbury (Mr. Marten) not to detain the House. I hope that he will excuse me if I take just a minute or two to reply.
Most of the matters raised by the hon. Members opposite would have been more aptly raised on the broader motion which we discussed the other day, but as a number of points have been raised, I shall answer them as briefly as I can. The best and most elaborate answer may be found in "Erskine May", which describes the meaning of the words we are discussing. Pages 644, 645 and 646 also cover the fascinating question of calling witnesses from overseas.
It will be seen that the Committee has been given the most extensive powers


which a Select Committee can have. Select Committees decide their own procedure. The terms of reference which the House passed the other day are not rigid. The Committee could range wide in seeking the information it requires.
I am doubtful whether the Committee has the power to summon foreign heads of State or Commissions or even
spirits from the vasty deep".
All these characters are not under the general surveillance of this Parliament. Of course, invitations could be issued and I dare say many of the witnesses would be only too eager to give extensive information. But that would be on a voluntary basis.
The Committee will have the powers normally laid down for a Select Committee and on that basis I hope that the House will approve the Government's proposal and agree that, whatever criticisms there may have been of the motion, the Government were right in deciding, first, that a matter of such importance should be examined by a Select Committee and, secondly, that we should have terms of reference satisfactory to the whole House. That is what we have sought. I think that the whole House

has agreed that our terms of reference are the right ones.
I know that there has been some dispute about the actual membership of the Committee. These are always invidious issues. It might have been quite an easy solution if my hon. Friend the Member for Liverpool, Walton (Mr. Heffer) and the hon. Member for Banbury had both been put on the Committee. I acknowledge that that might have eased the situation. That casts no reflection on the other members of the Committee. I hope that the House will now proceed to allow the Committee to get on with its work.

Question put and agreed to.

Ordered,
That the Committee have power to send for persons. papers and records, to report from time to time and sit notwithstanding any Adjournment of the House.

Ordered,

That Four be the Quorum of the Committee.—[Mr. Walter Harrison.]

ADJOURNMENT

Resolved, That this House do now adjourn.— [Mr. Snape.]

Adjourned accordingly at twenty-six minutes past Two o'clock.